Monetary policy, Fiscal policy and Physical control over production and distribution in India

To control the forces of demand and supply state intervention is essential in developing countries like India. For the proper development of the country this becomes an important function with the government. Now the question is, how and in what ways should government intervene? There are generally three main ways in which government can intervene.

They are Monetary policy, Fiscal policy, and Physical control over production and distribution.

Monetary Policy

Monetary policy refers to those measures which help control the supply of money and credit in the economy. The main objectives of monetary policy in India have been economic growth, price stability and deployment of credit among different sectors of the economy.
The monetary policy is formulated and operated by the central bank of the country. In our country this work of monetary and credit control is performed by the Reserve Bank of India. For this the Reserve Bank generally adopts following five measures

Measures of Monetary and Credit Control

  1. Issue of Currency Notes. In our country RBI has the monopoly to issue currency notes. Government’s deficit in budget is financed by the credit from the Reserve Bank. Consequently it increases the money supply in the country. The increase in money supply increases purchasing power of the people and the demand in the market. If this increase in demand is not matched by an increase in supply of goods, it results in price-rise. That is why the RBI has to keep control on the circulation of currency notes. Besides the control on currency, the RBI also keeps control on the bank credit.
  2. Bank Rate Policy. The rate at which the RBI gives loans to the commercial banks is known as bank rate. On the other, the rate at which commercial banks gives credit to their customers is interest rate. Bank rate and interest rate have a very close relation. If the RBI wants to expand credit creation, it decreases the bank rate and if it wants to contract credit creation, it increases the bank rate.
  3. Open Market Operations. Activities related with the sale and purchase of securities by the central bank in an open market are known as open market operations. If the Reserve Bank wants to expand credit, it starts to purchase the securities in the open market and if it wants to contract credit, it starts to sell securities.
  4. Changes in the Cash-reserve Ratio. We know that every bank has to keep a certain minimum proportion of its total deposits in the form of cash. This minimum cash reserve is determined by the Reserve Bank. The Reserve Bank can increase credit creation by reducing this cash-reserve ratio and it can decrease credit creation by enhancing the rate of cash reserve ratio.
  5. Selective Credit Control. In developing countries like India it is not sufficient to have control merely on the total volume of credit in the country. Here it is also essential to see that credit should be available in sufficient quantity and at concessional rates to the socially desirable activities and on the other, the flow of credit should be checked to the undesirable or unessential activities. For this the Reserve Bank adopts many measures such as credit rationing, direct action or preventing credit for certain purposes, consumer credit control, changes in margin requirements etc. These are the measures which are known as selective credit control. In the Indian situation selective credit control measures are more important.
    Fiscal Policy

Fiscal policy means the policy related with public expenditure, taxation and public debt. In short, it is the budgetary policy of the government.
The main objectives of fiscal policy for underdeveloped countries like India are as follows
(i) Economic growth, (ii) Increase in rate of investment and capital formation, (iii) Diversion of investments into socially desirable channels (iv) Social justice or equity in the distribution of income and wealth, and (v) Price stability.
There are two main constituents of the budget: public revenue and public expenditure. Public revenue can further be divided into two parts; non-tax revenue and tax-revenue.

Taxation. Taxation is a very important instrument with the government with which it can intervene in the economy to control the forces of demand and supply. Taxes are of two types; direct taxes and indirect taxes.

A tax which is paid by a person on whom it is imposed and the burden of which cannot be shifted on others is called a direct tax. Examples of direct tax are : income tax, wealth tax, estate duty, gift tax, expenditure tax etc. The central aim of direct tax is to reduce inequalities between the rich and the poor. That is why we should extract more from a richer man’s income.

The tax which is ultimately paid by some other person than the person on whom it is imposed, is called indirect tax. The burden of this tax can be shifted to some other person. For example, sales tax is imposed on the sellers by the government but sellers realise it from the buyers. Sales tax, excise duty, stamp duty, custom duty etc. are all examples of indirect taxes.

There are two main differences between direct tax and indirect tax (i) The burden of direct tax cannot be shifted to others while the burden of indirect tax can be shifted to others. (ii) Direct tax is imposed on persons while indirect tax is imposed on transactions.

The aim of indirect taxes is two-fold: (a) Indirect taxes can be used, to a certain extent, in reducing inequalities. (b) Through them we can either encourage production and the use of certain goods or discourage the production and the use of some other goods.

Thus, taxation can be used to achieve following objectives

(i) To earn revenue;

(ii) To reduce inequalities;

(iii) To influence the allocation of resources;

(iv) To influence saving and investment.

Public Expenditure

To influence economy, public expenditure is also an important instrument with the government. As we know that the purchasing power of the poor people is low. Hence, private entrepreneurs do not want to produce goods for them. Therefore, government should prepare its public expenditure programme in such a way so that it can provide more facilities to the general public. For example, schools, hospitals, public parks, buses, railways, supply of drinking water etc. are examples of such. Besides this, the total volume of public expenditure also influences the economy. When there is inflation in the country, government should curtail its non-essential and non-developmental expenditure.

Thus, government can make changes in the economy through taxation and public expenditure policy. Here in the Indian context w must bear in mind one more important point. We know that ours is a federal country. Here we have central government as well as state governments. It is, therefore, essential to have complete harmony in the policies of central and state governments with regard to taxation and public expenditure.

III. Physical Control Over Production and Distribution

Government exercises physical control mainly in two ways (i) Industrial licensing, and (ii) Rationing and Public Distribution System.

Industrial Licensing

In the field of production government exercises its physical control through the policy of industrial licensing. The main objectives of industrial licensing policy in India have been as follows

(i) To check the concentration of economic power and monopoly in the industrial sector;

(ii) To reduce regional economic disparities;

(iii) To encourage Cottage and Small Scale Industries;

(iv) To give direction to the industrial investment,

Industrial licensing is governed by the Industries (Development an Regulation) Act, 1951. Over the years, keeping in view the changing industrial scene in the country, the industrial licensing policy has undergone modifications. Accordingly a new industrial policy was announced in July 1991. In this policy industrial licensing has been abolished for all industries except for 7 specified groups. Compulsory licensing has been considered necessary for security and strategic considerations, safety reasons and over riding environmental concerns and the need to regulate production of articles of elitist consumption. The theme of the policy is continuity with change.

India’s Terms of Trade- Balance of Trade

India’s Terms of Trade

Terms of trade means the rate on which exports are traded with the imports. In other words, it indicates the quantity of exports which is given in exchange of one unit of import goods. The favourable terms of trade for a country implies that it has to export lesser amount of goods in exchange of a given amount of import-goods. India’s terms of trade is getting worse or we are facing the problem of unfavourable terms of trade. It means we are required to pay more and more with our exports for a given amount of imports every year. It is because of the reason that the prices of some of our vital imports are rising more speedily than the prices of our export items.

Process and Working of Foreign Trade

There is an important difference between internal trade and foreign trade. In internal trade country’s currency is used both by the buyer and the seller. But in foreign trade country’s currency is exchanged with the foreign currency. When we export we get foreign currency (or foreign exchange) and when we import we need foreign currency while foreign Countries get our currency (rupees). In this process of foreign trade exchange between different currencies may be required. Suppose an Indian trader exports goods to U.S.A., he earns dollars which he needs to convert into rupees. Similarly, if he imports from U.S.A., he has to buy dollars in exchange for his rupees.

Now the question is how the r1te of exchange between rupee and dollar is determined? In a free competitive market, the rate of exchange between U.S. dollar and Indian rupee will be determined by the relative demand for U.S. goods and capital in our country and for our goods and capital in the U.S.A. Keeping in view this criterion, the actual rate of exchange is generally fixed officially by the two countries.

Efforts are made to keep the rate of exchange free from temporary fluctuations in demand. In this task International Monetary Fund (IMF) plays an important role. IMF maintains the reserves of all currencies which are contributed by the member Countries according to their fixed quotas. Whenever a country is in shortage of a particular currency it can get it form the IMF reserves. But actually our imports have to be paid by our exports. The Reserve Bank of India controls the purchases and sales of foreign exchange and also maintains the foreign exchange reserves of our country. When country’s imports are higher than the exports, the foreign exchange reserve goes down and vice versa.

Balance of Trade

Balance of trade of a country means the systematic record of imports and exports of goods in a given year. We can find out the balance of trade of a country by deducting its imports from its exports.

Balance of Trade = Exports — Imports

If the exports exceed imports, balance of trade is said to be favourable and if imports exceed exports, it is regarded unfavourable. In India we are facing the problem of unfavourable balance of trade since independence. There are two main causes of this trade deficit

(i) Rapid and continuous rise in our imports over the years due to developmental requirements, food crisis and border disputes with the neighbour countries.

(ii) Slow progress in exports.

To overcome the problem of trade deficit we have to make efforts in two directions:

  1. Import Substitution—Import substitution means to promote and support indigenous production through indigenous resources especially the goods of imports.
  2. Export Promotion. Export promotion means promotion and expansion of exports. Now India is relying more on export motion.

Caste System in India- Advantages and Disadvantages

Caste or Varna is a social class in a society: It divides people into groups on the basis of their birth, family, rank, wealth, social matters etc. According to Dr. Sham Shastri, “Organisation of some people into a a group for the purpose of several social matters like marriage and diet is called a caste.”


In the ancient days, the Hindu society was divided into four Varnas or castes namely, the Brahmans, Kshatriyas, the Vaishyas and the Sudras. These castes were formed on the basis of occupations which the people followed and not on the basis of birth. Those who studied the Vedas and took charge of the religious ceremonies were called the Brahmans. Those who were warriors and protected the people were called the Kshatriyas. Those whose occupation was trade and commerce were know as the
Vaishyas. The cultivators, artisans and craftsmen were known as the Sudras. Outside the above four castes, were the untouchables. Any person could change his occupation and enter another caste.


Gradually, the Hindu caste system became complex and rigid. The Hindu society was divided into many castes and sub-castes. Each caste developed PC its own customs and ceremonies. The members of a caste could marry only among themselves. Some castes were considered as high and others as low. Gradually, the castes became hereditary. Change from one caste to another became difficult. The caste was closely allied with religion. The caste system believes in the theory of Karma. It means that a person is born in a caste due to his actions in his previous birth. One can improve his caste status in his next life (Janama), if he strictly obeys the caste rules in his present life.

Advantages of Caste System

The caste system had a number of advantages.

1.The caste system was based on the principle of division of labour. It promoted efficiency in professions and functions. The son knew from the early childhood that he was to take up the occupation of his father. The system preserved skilled labour because the vocational skill was passed on from one generation to the next. It led to specialization and added to economic prosperity of the society.
2. The caste system solved the problem of unemployment. It solved the problem of livelihood in a satisfactory way.
3. The division of society into castes contributed to the preservation of the purity of blood as inter- caste marriiges were lrbidden.
4. It enabled Hinduism to preserve its vital elements, its spirit and its ideals for thousands of years.

Harmful Effects of Casteism on Society 

It cannot be denied that many evils resulted from the caste system. It struck at the very roots of human dignity. It caused havoc in every sphere of Indian life.

Firstly, the caste system has been a source of political weakness of India. By dividing the society into thousands of castes and sub-castes, it made impossible for the Hindus to be united into a strong nation. Secondly, the caste system weakened the defence of the country The defence of the country was the’ duty of the Kshatriyas alone. The rest of the population did not come forward to fight against the foreign invaders. Thirdly, it is against the principle of equality It harms the higher as well as the lower castes. It breeds in the former a false sense of pride and superiority and in the latter a feeling of inferiority. Fourthly, the most unfortunate result of the caste system was the practice of untouchability. Till recently, the untouchables could not use the same wells, bathe in the same tanks and offer prayers in the same temples as the higher castes. It thus created hatred between the people of different castes. It sapped the strength of the national life. As the untouchables were regarded as out-castes, a large number of them left the Hindu-fold and embraced other religions like Christianity and Islam. Fifthly, the caste system practised in India is against the spirit of brotherhood of mankind. In the ‘modern times, the division of the society into castes and creeds is undesirable.

Causes of Decline of Caste System

The caste system has lost its rigidity due to the following factors:
1. Work of Socio-religious reformers. Socio-religious reformers like Chaitanya, Ramananda, Kabir, Guru Nanak Dev, Baja Ram Mohan Roy and Swami Dayananci strongly condemned the caste system. They started powerful movements against it. Mahatma Gandhi also tried to remove caste barriers in the society. He spread the spirit of brotherhood of mankind and brought all the sections of the society in the national movement.
2. Impact of West thought and scientific development. The Western thought and the growth of science and technology have created liberal outlook among the people. Inventions of different means of mass media like the newspapers, radio, television have also brought social awakening among the people. The growth of literacy has also helped in the eradication of the caste system.
3. Means of Transport. The development of means of transport like the railways, buses and aeroplanes have contributed much to the break down of caste barriers. The people belonging to all castes sit together and partake the same food while travelling. It has developed a feeling of oneness. This naturally gives a setback to the rigidity of caste system.
4. Large scale industrialisatlon. The growth of large scale industries has led to the growth of big cities. The people belonging to different classes have migrated to these towns to earn their livelihood. They live together in the same buildings or areas. They become neighbors and break their caste barriers. They combine together and fight shoulder to shoulder for their common cause.

Government Efforts for the Eradication of Caste System after Independence

The Constitution of India has made India a secular and democratic country. The government has passed laws about the inheritance of property and legitimacy of the children born out of inter-caste marriages. The Constitution has abolished the practice of untouchability. To practice untouchability in any form is a criminal offence.

Future of Caste System

Today, the political, social and economic conditions are no longer favourable for maintaining caste distinctions. The spread of education, the development of scientific outlook, the growing spirit of equality among the people, the advance of industrialisation etc. are slowly but certainly helping in the disappearance of caste system from India. The vocation is no longer, a sure index of caste. For instance, many Brahmans are setting up as traders, shopkeepers and industrialists. The other castes are adopting the professions of teaching. Inter-dining and mixing at social functions have given a severe blow to the caste system. The great social and political leaders and educationally advanced Hindus are making
efforts to purge the Hindu society of the evils of caste system.

Process of Liberalisation, Globalisation and Privatisation

The entire world economy has been experiencing dramatic changes since the eighties. In the recent past the economic reforms have been as widespread as today. Economic reforms are being undertaken at such a pace that they are sweeping the entire Eastern Europe and developing economies. These countries are gradually discarding old economic systems and following the new economic systems. There has been a remarkable change in the economic and social institutions all the world over. Countries are following economic reforms in order to have more rapid and sustained economic growth. India is one of the developing countries which has brought economic reforms for quicker development of the economy.

Process of Liberalisation

Economic liberalisation means reducing government interference in economic activities and encouraging privatisation. Liberalisation implies liberating the trade and industry from unnecessary restrictions and at making the industries more competitive. The new industrial policy has abolished the system of industrial licensing for all industrial undertakings except 5 industries. It means 85% of the industry has been taken out of the licensing framework. Now the industries need not take any prior sanction from the government. It can increase its capacity to produce the goods. The producers are free to decide what commodities they are to produce. The asset limit of 100 crores for MRTP companies has been scrapped. The investment limit for tiny sector has been raised to 25 khs and for small scale industries to Rs. 3 crores. The industrialists are free to buy foreign exchange from the open market and make necessary imports. Sanction of government is not required now. As a result of this liberal policy, there will be more competition among industries and they will strive for more efficient production.

The main objectives of process of liberalisation are as follows : (1) Removing the obstacles in the process of economic development, (2) Increase the competitiveness of the Indian industries in order to enter the international markets, (3) Widening the scope of private sector, (4) Ensuring the development of agriculture sector, (5) Stopping in efficiency, misuse of resources and red tapism, (6) Developing better money and capital markets, (7) Solving the basic problems of the economy.


In a narrow sense privatisation implies the induction of private ownership in publicly owned enterprises but in a broader sense it implies besides, private ownership the induction of private management and control in the public sector enterprises. Under new economic reforms, policy of encouraging private and discouraging public sector has been accepted. The number of industries reserved for the public sector since 1956 was 17. This number has now been reduced to 4. It means 13 industries have been thrown open to the private sector.

Previously, the public sector enterprises were reserved for certain areas but now the private sector has also been allowed to enter these areas. This means injecting competition into these areas. The government has also privatised the ownership of some public sector undertakings. It has been done by the sale of a part of the capital of some selected enterprises to the private sector. Thus, by disinvestment of a part of the capital the government has made public enterprises accountable to the private sector criterion, namely, market related profits. Thus with the expansion of privatisation there is every possibility of increase in productivity and efficiency.


The term globalisation is considered as an important element in the reform process. Globalisation means unification or integration of the domestic economy with the world economy. This is the result of a number of policy initiatives taken by the government. The main policy initiatives are as under:

(i) Rupee was devalued by 21% in 1991 in order to bring it down to the realistic level in terms of the domestic price level and the world price level. Rupee has also been made fully convertible.
(ii) The removal of licensing of large many export items has also enabled the exporters to supply their goods to more countries where there are the chances of export promotion.
(ii:) Direct foreign investment upto 51% of foreign equity has been allowed in 48 industries. 74% direct investment has been allowed in 9 categories of industries and 50% direct investment has been allowed in 3 types of industries. Now our economy has been open in respect of both exports and direct investment. All these steps will help in the development of trade in the world.

Thus globalisation means pursuing:
(1) Reduction of trade barriers so as to permit free flow of goods across the world; 9 (2) Creation of environment, allowing free flow of technology;
(3) Creation of environment for free flow of capital among the world nations;
(4) From the point of view of the developing countries, creation of an environment for free flow of labour in different countries of the world.
The advocates of globalisation, more especially from developed countries, limit the globalisation definition to only three components, viz, unrestricted trade flows, technology flows and capital flows. However, several economists in the developing world believe that flow of labour cannot be left out. But the whole issue whether debated at the W.T.O. or at other forums blacks out the labour flows as a necessary component of globalisation.

Meaning and Functions of Economy

With the growth of civilization man’s needs have undergone an increase. The availability of goods and services for fulfilling these increasing needs could have been possible with the mutual co-operation of the persons. The people started doing various types of activities to fulfill their needs through mutual co-operation, like one person started the production of cloth and the other of foodgrains. Similarly, different persons started producing different goods. Certain persons like doctors, lawyers, teachers etc. started offering their services and consumption for satisfaction of wants could have been possible with the help of an organisation or institution. This organisation is known as economy. In the ordinary language, the word ‘economy’ refers to frugality, but in economics this word is not used in the sense of frugality It is referred to that organisation which provides living to common people in a set region under one political set up.


According to Advanced Leaweic Dictionary. “Economy means control and management of the money, goods and other resources of a community or society” Every person in the society is engaged in earning his. livelihood by performing various types of activities. Some are doing service, some are running shop, some are teaching, some sell tea, some .are pulling rickshaw, while others are driving a three-wheeler r a taxi. All this working force produces goods and services while working at their place of work and get remuneration for their work rendered. All those activities which are remunerated are called economic activities. Thus different people, in a country, are engaged in different economic activities to earn theirs living and thus satisfy their wants. In a way all persons, in an economy, are earning their living and thus satisfying their wants either by working as teachers, lawyers, singers, doctors, dancers and thus providing services to the nation. Such an economy can be a family, village, town, district, state, country or the whole world. Thus, economy is the sum total of all economic activities of the society. In other words, economy is a system of production, consumption, investment and exchange for making a living.
In the words of A.J. Brown, “An economy is a system by which people get a living and satisfy their wants.” According to J.R. Hicks, “An economy is a co-operation of producers to satisfy the wants of consumers; on the other hand, remembering that the producers and consumers are largely the same people, we can look upon it as, a system of mutual exchanges.”


Production, consumption, exchange, distribution, investment and saving are the vital processes of an economy.
(1) Production. It refers to the creation of utility in such a way that there may be an increase in the value of the commodity Utility is the want satisfying power of a commodity. There are various forms by which utility can be created in a commodity namely (a) by changing the form, (b) by changing the place, (c) by changing the time, (d) by increasing knowledge and (e) by service. The main factors of production are land, labour, capital and enterprise.
(2) Consumption. It is the direct use of the utility of a good or service for the satisfaction of human wants e.g. eating food, wearing clothes, getting medicine from a doctor etc.
(3) Exchange. In it we study the exchange of goods and services, how prices are determined. What is market? What is trade? Goods and services are exchanged with the help of money.
(4) Distribution. It is an economic activity related to the distribution of reward among various
(5) Investment. Increment incurred in capital is investment. That portion of income which is not spent on consumption but is used for capital formation for nation after saving is known as investment. 1= Y— C = S. Here I = Investment, Y = Income, C = Consumption and S = Savings. Machines, tools, raw material, railways, roads, factories are examples of investment where capital has been invested.
(6) Savings. It is the difference between consumption expenditure (C) and income. S = Y – C. In every country investment depends on savings, more the savings more will be the investment.
(7) Economic Growth. The main objective of an economy is economic development. Economic development brings an increase in income and output. The constant rise in national income and its equitable distribution is most necessary. Economic development depends on capital formation, right use of natural resources, efficiency of labour, growth of agriculture and industry.

In short, it can be said that production, consumption, distribution, investment, saving and economic development are the main economic activities of an economy. The smooth and collective direction of these activities are the essentials of an economy.

Road Transport in India

Transport, Communication and Trade are together included in Tertiary economic activity. They are also the chief means of exchange and interaction between different sectors or regions of an economy. Trade arises on account of specialisation and regional economic differences. For trade to take place transport and communication are necessary.
A good network of roads, railways,waterways and airways are the life-lines of a country. The agricultural and economic development of a country depends upon efficient transport system. The developed means of transport is essential for the utilization of natural resources. It is the basis of industries and the trade of country. It helps to join the far flung regions into a single national economy. These help in defending the independence and the national unity of a country. Just as the arteries supply blood to the different parts of human body, similarly transport system maintains the movement of men and different products in different parts of the country. So means of transport are called lifelines of a nation.

Means of transport can be divided into three types:
(i) Land Transport. (ii) Ocean Transport. (iii) Airways.

Road Transport in India

India today has more than 34 lakh km road networks, one of the world’s largest. Road is a major medium of land transport. It is the cheapest and the quickest means of transport for short distances. Roads can be constructed in rough and undulating terrain. The use of surface roads for automobiles has increased the importance of roads.

Surfaced and Unsurfaced Roads: There are two types of roads in India (i) metalled roads (surfaced roads) and (ii) unmetalled roads (unsurfaced roads). Metalled roads are the best roads made of cement or tarcol. The unsurfaced roads are Kutcha roads. These roads are important in rural areas of India. These can be easily constructed. These roads connect villages with towns. These roads open up the countryside to the modern ways of living in towns. These roads are suitable for carrying goods by bullock carts over short distances. India has 15 million bullock carts which carry nearly 900 million tonnes of goods. There are about 11 lakh kilometres of unsurfaced roads in India.

The history of road construction in India is very old. Sher Shah Sun constructed Grand Trunk Road. After independence, a 10 year road development scheme known as the Nagpur Plan, was prepared. Four types of roads are found in India (on administrative basis).
(i) National Highways
(ii) State Highways
(iii) District Roads
(iv) Village Roads

Road density: The length of road per 100 sq. km is known as density of road. It was 63 in 1997-98 in India. Low road density is found in hilly areas. High density of roads is found in states of Northern India, Tamil Nadu and Kerala.

Main features of Roads In India:

(1) India has 14 akh km of metalled roads.
(2) India has 11 lakh km of unmetalled roads.
(3) India has just 63 km road length for every 100 sq. km area. (Density). It has a road length of 251 km for every one lath people.
(4) India has 57,735 km of National Highways arid 4 lath km of state highways.
(5)About 26 lath automobiles move on roads of India.
(6)Annual income from roads is about 1500 crore rupees.
(7)Indian roads carry about 30% of total freight of the countly
(8)The important National Highways are:
(a) Sher Shah Sun Marg (G.T. Road) Kolkata to Jammu.
(b) Delhi-Mumbai Road
(c) Kolkata-Mumbai Road
(d) Mumbai-Chennai Road
(e) Great Deccan Road (Varanasi to Knyakumari)
(f) Kolkata-Chennai Road
(g) Pathankot-Srinagar Road

The Border Road Development Board was established in 1960. It has got constructed about 27,925 km long metalled roads in border areas. It has constructed the world’s highest road from Manali (H.P.) to Leh (I & K). The average height of this road is 4270 metres.

BOT organisation : The govt. has opened road building to a Private Sector with joint collaboration of foreign countries. Its policy is to ‘build’, ‘operate’ and ‘transfer’. It will bear the cost of construction, operate roads, collect road taxes.

Contribution of Industries to National Economy in India

The distribution of industries, their concentration in certain industrial regions as well as their pattern actually present a certain theoretical framework in which to examine the importance of industries and their contribution to national economy. Obviously this contribution is more significant if examined relative to two other sectors of the economy namely the primary sector and tertiary sector. The chief areas of this contribution are the following:

(a) Contribution to National Income : It is one of the two significant measures of industry’s contribution to national economy. The other being employment discussed below. Contribution to National Income is considered a value measure. It measures the value of finished product and is made up of different components like value of labour, interest on capital invested and taxes paid etc. The share of industrial sector has been consistently rising since industrialisation began in 1950s. It has reached to the level of about 18 per cent against 26 per cent of agricultural sector in 2001.

(b) Employment: According to the results of Economic Survey conducted in 1998 there were about 32 million enterprises in the country Out of these 27 million enterprises were in non-agricultural sector. Total number of hired workers in non-agricultural sector stood at about 40 million. While agriculture continues to provide employment to about 62 per cent of the work force, its share has been declining and that of industry rising.

(c) Growth: Industry is chiefly responsible for economic growth. Though the growth tale of industrial sector itself has slowed down to 5.6 per cent against the target of 8.2 per cent during Ninth Plan (1997 — 2001), industry significantly contributes to over all growth of the economy because of interdependence and linkages with agricultural sector.

(d) Trade : Trade is entirely dependent on’two important factors—(i) development of transportation and communication (ii) technology for making use of unevenly distributed resources of the earth. Both these factors depend on industry. India’s trade today is highly diversified and Indian industrialists including skills are finding greater and greater acceptance in international market. Daring 2001, exports have grown by about 20 per cent. A good part of these exports come from industrial sector and non-traditional products.

(e) Urbanisation : Industrialisation along with development of trade are chiefly responsible for emergence of large towns and cities. Industry not only provides economic base to urbanisation but also helps provide public utility services like for example drinking water, waste disposal system aid many other comforts for living.

A number of other value measures like for example development of transport, communication, education, entrepreneurship, better standard of living, higher health standards and other contributions can also be attributed to industrial development.

Need for Preservation of Our Cultural Heritage

Our country has a very glorious, rich and varied heritage. It is also unique in many respects. It is the foremost duty of the state and the people of our country to preserve it at all costs because it is the most valuable source for the reconstruction of our history. The question arises as to why we must preserve this national asset.

Provides knowledge of the Origin and Progress of Our Culture

Our heritage i.e. old monuments, buildings, sculpture, paintings, pottery, old tools, weapons, coins, inscriptions etc. provide us knowledge about the civilization that took birth in India in the remote past. R.C. Majumdar observes, “India takes her place side by side with Egypt and Mesopotamia as a country where we trace the dawn of human civilization”. The articles of our heritage tell us how man lived in pre-historic age, how he became a food grower from good gatherer and began to lead a settled life, how he gradually developed the art of making pottery weaving cloth, building houses and smelting metals. We also know how the villages came into existence and the town developed.

Storehouse of Literature

Great works of religious and secular literature were written in our country in different periods of our history We have preserved abundant literature which is a great source of our knowledge. The four Vedas, the two great epics— Ramayana, Mahabharata, the Upanishads, the Puranas of the Hindus, the sacred books of of the Buddhism and Jainism form the heritage of our religious literature. Besides, we have secular literature like dramas and poetry written by innumerable scholars like Bana Bhatt, Chander Bardai, Kalidasa, Harisena, the historical works and literary works written in medieval and in the British period, influence on scientific thought in Arabia and other Islamic countries arid indirectly in Europe. We learn that in ancient India, the science of metallurgy was far advanced than in many countries of the world. The Mehrauli pifiar stands as a silent witness to proclaim the excellent skill in working metals of the metallurgists of ancient India. The discovery of several huge copper statues of the Buddha represent the triumph of the metallurgical skill of ancient India.

Helps in the study of development of art and architecture in India

The study of our architectural heritage is necessary to know the development of art of building in our country. Numerous beautiful temples, stupas, palaces and Viharas were built during the ancient period. Some of them have come down to us. These monuments are unique specimens of art and architecture in the world. Many specimens of sculpture and painting have survived the ravages of time I have been preserved by the archaeologists. The capital of the Sarnath column of Ashoka has been adopted  by the Indian Government as national symbol.

The paintings at Ajanta have been lauded by all the lovers of art in the world. The lines and colours used at Ajanta display the excellence in skill which is not found in the world before the end of 15th .A.D. The beautiful buildings built during the medieval period like the Qutub Minar, the Taj palaces at Fatehpur Sikri and Red Fort etc. form the magnificent specimens of our heritage. During the British period as well, the rulers built magnificent buildings like Victoria Memorial at Calcutta, the Victoria Terminus railway station at Mumbai, the Rashtrapati Bhavan etc.

Source of Knowledge about the economic condition of the country

Many articles have come down to us which help us in the construction of economic history of our country. We have preserved in our museums many articles produced by our artists and craftsmen during
the medieval age. We learn how industries like cloth weaving, metal smelting, leather industry, iron and steel industry, weapon making industries, ivory work, ornament making industry etc made progress. In ancient times, India had flourishing trade with many countries of the world and earned large quantities of gold in exchange for her exports. India also built ocean going vessels to promote trade.

Our heritage throws light on the growth of social life

Our literary heritage such as the Vedas, the two epics, dramas, poetry written by scholars during the ancient times, and historical and literary books of the medieval and the British period tell us how the social institutions and practices developed which greatly influenced the lives of the people. We learn how the caste system developed in ancient India and how it influenced the social life of the people. We also get knowledge about the joint family system, the position of women, the evils of untouchability the practice of child marriage and female infanticide.

Helpful in the Reconstruction of history

The coins and the inscriptions discovered by the archaeologists are much helpful to us in the reconstruction of our history These contemporary records are of reliable character. The inscriptions have furnished us with the names of the kings. Some inscriptions record chronologically important events of ancient Indian history The edicts of Ashoka on rocks and pillars help us in reconstructing the whole history of his reign. They enable us to form the idea of the extent of his empire. The Allahabad Pillar Inscription composed by Harisena is the most important source of history of the reign of Samudragupta, his wars against the northern kings and about the route of his southern expeditions. Without the Allahabad Pillar Inscription, we would have been completely ignorant about the political achievements of a great king like Samudragupta. A large number of coins belonging to the ancient, medieval and British period have been collected and preserved. The legends on the coins help us by providing important clues for solving the chronological puzzles and tell us several new things which we do not get from other sources. The coins of Indo-Bactrian kings clearly prove that they ruled over northern India. The coins of Kanishka show that he was the follower of Buddhism. Several coins found in Deccan establish the fact that the Indians had trade relations with the Romans.
Similarly the coins belonging to the medieval and British periods indicate the economic and political condition of the contemporary period.

Our heritage provides knowledge about the system of Government in India

The monuments and the literary works, both secular and religious, such as Kautilya’s Arthashastra, Magesthenese’s work Indica, Kalhana’s Rajatranginz, Banabhatta’s Harashacharila, Abul Fazal’s Ain-i Akbari, Tuzak-i-Jahangiri Abdul Hamid Lahori’s Shah Namah (biography of Shah Jahan) etc. tell us about the system of government in the country in the ancient and medieval times. For instance, the literary sources of ancient India show that republics and local self-governing institutions flourished in ancient India. In the republics, there were councils elected by the people to run the administration. The councils took decisions by majority votes. In the Vedic Age, the kings had councils or Sabhas which were democratic in nature. The rulers considered it their foremost duty to look after the welfare of the people. There were also self-governing institutions in the villages and towns. The village Panchayats dispensed justice and took measures for the welfare of the people. During the Sultanate period, most of the kings were despots. The Mughal rulers made much improvement in the system of administration. Among the Mughal rulers, Emperor Akbar was the most enlightened ruler and followed a policy of religious toleration. The British rulers passed many constitutional laws to rim the administration of the country But most of these Acts were passed for the benefit of the British and not for the welfare of the Indians.

Knowledge about growth of different religions

Indian religious literature throws much light on the birth of Hinduism, Jainism and Buddhism. In the end of the 15th century, the Sikh religion took birth in the Punjab. We have abundant literature which helps us in the study of the growth of Sikh religion. The people belonging to these religions lived together and exhibited a spirit of religious toleration. We have Islamic literature which helps us in the study of history of this religion in our country.

Links of Indian culture with the cultures of other countries

Our ancient heritage had close links with the cultures of the South Asian countries in ancient times. A mass of foreign inscriptions written in Sanskrit, Japanese, Siamese, Khmer, and Chinese have been discovered. They all have yielded much information about the activities of the Aryan colonists and the Indian culture in those distant lands. This information has fortunately been supplemented by the noble architectural remains of Indian colonial art in these regions. The great temple like Ankor-Vat in Cambodia and Barabudur in Java bear testimony to the colonial and cultural activities of Indians in ancient times.

The accounts about India left by the Chinese pilgrims are a part of our heritage. Fahein, Hiuen Tsang who visited India during the 5th and the 7th centuries A.D. describe the social, economic and political condition of India in ancient times. About Hieun Tsang’s account, Dr. Smith remarks, “His book is a treasure house of accurate information indispensable to every student of Indian enquiry”

Classification of The Landscape of India

The modern writers generally divide India’s landscape into four well-marked units.

A) The Himalayas

In the northern India lay the greatest and the highest mountains called the Himalayas. In the ancient times, they were called as Himavant meaning the “abode of the snow”. This snowy wall runs across the north India and is about 2500 kilometres in length. It stretched from Assam in the east to Afghanistan in the west. Its eastern branches include the Khasi, Lushai, Patkoi and Jaintia hills and extend upto the Bay of Bengal. These areas are covered with dense forests. Being of considerable heights, they separate Burma from India. The western branches of the Himalayas extend from North-west India to the Arabian Sea. These branches are known as Sulaiman and Kirthar Ranges. They separate India from Afghanistan and are not as high as the hills on the eastern side.

The Mountain Passes: A mountain pass is generally a narrow opening pierced by a river for its way to the plains. In the Himalayas, there are many large and small passes.

There are important passes in the Sulaiman ranges which connect India with Afghanistan. The Khyber is a low lying pass in the broad valley of the river Kabul. This pass commands the direct route from Kabul to Peshawar. It was the junction or meeting point of ancient trade routes. It was also through this gateway that most of the foreign traders and invaders entered India. The Kurram, Tochi and Gomal passes connected Derajat and Bannu with Central Afghanistan. The Bolan pass connected India with Kandhar. It was the centre of the caravan routes to Siestan and Persia.

B) The Indo-Gangetic Plain

 The other natural heritage of India is the Indo-Gangetic plain. It is about 2000 miles long and on the average, 200 miles broad. It lies between the foot of the Himalayas and the Arabian Sea in the west and the Bay of Bengal in the east. This plain is made of silt brought by the three great Himalayan rivers— Brahmaputra, Ganga and the Indus and their tributaries. These rivers have a regular flow of water from the Himalayan snow and some of their tributaries are navigable in the plains from the Bay of Bengal to Agra and from the Arabian Sea to Lahore. In fact, before the introduction of the railways, these river systems used to carry a large volume of trade and traffic.

The Indo-Gangetic Plain is divided into three unequal compartments. The Santhal Parganas cut Bengal from the main Gangetic plain. On the west, a little beyond Delhi, Rajputana desert separates the Indus basin from the Gangetic plains. The Gangetic plain is the most prosperous and populous region of India. Its people are handsome, healthy and mostly the descendants of the Aryans.

The Aravali mountain hills divide the Indo-Gangetic plain into two parts.

The Eastern Part of the Gangetic Plain: The territories lying in the east of the Aravali hills are called the Eastern Gangetic They contain Ganges, Yamuna, Chambal, Ghaghara and Brahmaputra. The biggest cities of India which were once the capitals of great empires and centres of culture and civilization are situated in this region. These important towns are Allahabad, Banaras, Lucknow, Kanpur, Pataliputra (Patna), Bhopal, Senchi, Calcutta (Kolkata) and Dacca. These territories have abundant rainfall and the land is very fertile. The chief agricultural products of this region are rice, wheat, sugarcane, tobacco etc. The Gangetic plains were also the centres of art, literature and religious movements.

The Western Part of the Gangetic Plain: The south-western ends of the Indo-Gangetic plains are called the plains of the Indus. Important rivers like Sindh, Jhelum, Chenab, Ravi, Beas and Satluj flow through this region. The important towns in this region are Lahore, Multan, Gujranwala, Amritsar, Jalandhar, Ludhiana, Patiala, Ambala, Panipat, Delhi, Bikaner, Jaipur, Jodhpur etc. This region has comparatively low rainfall. But the streams, canals and wells provide enough water for irrigation of land. Large territories of Rajasthan and Sindh are deserts but the plains of the Punjab are fertile. The Jndus plains made less progress in art and literature as compared to the Gangetic plains. The density of population is also comparatively low in the plains of the Indus.

C) The Deccan Plateau (The South Land)

The Deccan is a triangular table-land rising abruptly in the west and sloping away towards the east. In this area, the chief rivers are, the Narmada, the Tapti, the Godavari and the Krishna. All the important rivers, with the exception of the Narmada and Tapti, flow westwards and fall into Arabian Sea. All the others flow into the Bay of Bengal. In the rainy season, all these rivers are often in flood and are not of much service as a means of irrigation. On the other hand, the rivers of the North viz, the Indus and the Ganges and their tributaries derive water from the Himalaya’s snow-fields and have a regular flow of water.

The Deccan table-land is separated from the North India by a number of natural barriers. The Vindhyas and the Satpuras with their outlying ranges form an important barrier towards the north. The valleys of the Narmada and Tapti rivers as well as the dense jungles lying south of Chhota Nagpur region constitute other barriers which were difficult to cross in ancient times. These barriers resulted in a tendency to keep the history of the rest of India apart from that of Deccan. The two—North and the South, had seldom been combined in one political and cultural bond. Most powerful Indian rulers like Ashoka, Samudragupta, Ala-ud-Din Khalji, Muhammad Tughlaq and even Aurangzeb could not succeed completely in subduing the Deccan.

D) The Coastlines

The Central table-land of Deccan is made of hard granite rock covered here and there with lava soil. This extends from the Vindhyas and Satpura mountains in the north to the Indian Ocean in the south. A greater p1rt of area between the Bay of Bengal and Arabian Sea is included in this region.

1) The Eastern Ghats: The area between the Central Plateau and the Bay of Bengal is called the Eastern Ghats. The region of the Eastern coast is formed by Godavari, Mahanadi, Krishna etc. These have enriched the soil of the Eastern Coast. The North-east winter monsoons give the area rainfall in winter and enable good cultivation.

2) Western Ghats: The narrow strip of land lying between the western heights of the Central and the Arabian Sea is called the Western Ghats. It is narrow at many places, not more than twenty miles wide. This has a rich soil and is always green with rice fields and coconut plants. The Narmada and the Tapti rivers in the north connect the Central Region with the Central Plateau.

3) The Southern end of the Peninsula: In the south of the western height of the peninsula lies the famous Paighat or “Gap of Coimbatore”. This pass connects the Malabar coast with Karnataka. This, Tamil country is watered by the Perinar and Kaveri rivers and is one of the most densely populated areas in the far south.

Salient Features of Economic Reforms in India

Salient Features of Economic Reforms

  1. Liberalisation. The thrust of the policy is the freedom for the entrepreneur to enter any industry/trade/business. The approvals for any venture are almost automatic. The various relaxations allowed in the new economic policy enables the entrepreneurs to make their decisions.The regimes of control have been removed and the economic operations have been liberalised on all counts. That is why it is termed as policy of Economic Liberalisation.
  2. Globalisation of the Economy The new economic policy has the stress on globalising the Indian economy. Globalisation means the unification or integration of the domestic economy with the rest of the world.
  3. Market Friendly State. Under this new policy the role of the state is largely to ensure a smooth functioning of the market economy. Controlled economy has now largely been replaced by a free economy.

Benefits of the New Policy

New Economic Policy will be beneficial to the economy in several ways. Such as

(i) It will improve the efficiency in the use of resources.

(ii) The growth rate of the economy is also expected to go up.

Shortcomings of the New Policy

Main shortcomings are as under.

(i) It does not contain any institutional arrangement to ensure a proper functioning of the new system.

(ii) It suffers from inadequate and wrong perception of the totality.

(iii) It overlooks the demand side.

(iv) It is also feared that if proper safeguards were not taken, if may further widen the gap between the rich and the poor. Besides this, it may also increase our dependence on foreign MNCs and international financial institutions like IMF and World Bank.

Hence, the success of this new policy depends on our indigenous efforts in the right direction.