EMPLOYMENT: GROWTH , INFORMALISATION AND OTHER ISSUES - CLASS 12 ECONOMICS - @educationforfree

EMPLOYMENT : GROWTH, INFORMALISATION AND OTHER ISSUES - CLASS 12 ECONOMICS 

• WORKER:  refer to those who are  involved in the  production activity  and  contribute  to the generation of  GDP. 

 TYPES OF WORKERS 

1  SELF EMPLOYED

Self  employed  workers  are  those who are  engaged  in their own  business or  own profession, for  example, a  farmer working  on his  own field.

2. REGULAR 

 Regular workers  are  permanently  em

ployed workers by  the employers.  They  get social security  benefits, for  example, an engineer working  in a  construction company.    

HIRED WORKERS 

Hired workers  are  those  who work for  others by  means of rendering  services to others and getting  paid in return, for  example, a  teacher working  in a school.  

4. CASUAL WORKERS

  

Casual workers  are  those who work on daily  wages.  They  are  not hired by  their  employers on regular  basis.

WHAT IS LABOUR SUPPLY?

 Labour supply  (supply  of  labour  corresponding  to different wage  rates) is the amount  of labour  that the workers are  willing  to offer  corresponding  to a particular wage  rate. 

WHAT IS LABOUR FORCE?

 Labour force  refers to the number of  workers  actually  working  or willing  to work  at a particular wage  rate.

WHAT IS WORK FORCE?

 Work force  refers to those  who are  actually  working  and does not  include  those who are willing  to work.   

WORK POPULATION RATIO 

  Worker Population  Ratio  is defined as the proportion of population that is  actively contributing  to the  production of  goods  and services.   Worker-Population  Ratio  =  Total  Workforce /Total  Population × 100 

WHAT IS JOBLESS ECONOMIC GROWTH?

Jobless economic  growth  refers to a  situation when the level of output  in the  economy  rises (due  to technological improvement)  without  proportionate rise in the  employment opportunities.  This is because  the technological improvement substitutes labour for machines.  Therefore, unemployment continues to  exist, even when there  is  a  rise in GDP.

WHAT IS FORMAL SECTOR? 

Formal sector  (organised sector of  the  economy)  includes all the  government departments, public  enterprises  and private enterprises that hire  10 or  more  workers.  

 INFORMAL SECTOR

 Informal sector  (unorganised sector of  the  economy) includes  all  private enterprises that hire  less than 10 workers, besides farming  and self-employment ventures. 

 •A situation of  decline  in the  percentage  of workforce  in the  formal sector  along  with simultaneous rise  in informal sector’s workforce  is  known as  Informalisation  of Workforce. 

• When the percentage  of  casually  hired workers in the total work force  tends  to rise overtime with simultaneous decline  in the self employment  and regular salaried workforce, then such a  situation is  referred to as  Casualisation  of  Workforce. 

WHAT IN UNEMPLOYMENT

 An individual who is  ready  and  willing  to work at  existing  wage  rate  but does not get work is considered as  unemployed.

 Types  of  Unemployment 

•Disguised Unemployment-  The  kind of unemployment that arises when the  number of  workers engaged is more  than what is actually  required in a job is  called  disguised unemployment.  For  example, if a  piece  of land can be  cultivated by  five  people efficiently, but eight people are  engaged, then three  people  are  disguisedly unemployed.

 • Seasonal Unemployment-  The  kind of unemployment that arises  when people are not able  to find jobs during  some  months of the  year is called seasonal unemployment.  For  example, farmers  are  seasonally  unemployed  for  few  months before  harvesting  crops.

 CAUSES OF UNEMPLOYMENT

1.  Slow Economic  Growth  failed to generate newer  employment opportunities for  the growing  population. 

2. Population  is  rising  at a  much higher rate  than the  rate of  increase  in the employment opportunities.

 3. Farmers remain unemployed  for  three  to four  months in a  year as  agriculture  is a seasonal occupation. 

4 Neglecting small  scale  industries  has made  a  significant proportion of  population unemployed.  Also the  stiff competition from large  firms and lack of  easy  and cheap credit  facilities made  the  cottage  and small  firms  more  vulnerable. 

5.   Lack of  infrastructure  impedes the  growth of the  industries that in turn obstructs employment  generation. 

6.  Due to staunch beliefs in the  traditional and  cultural values, the decisions regarding  females taking  up jobs  are  still  governed  by  her family  members  (a  major cause of low  female  participation in workforce).   

7.  Lack of investments in education and health sectors leads to lack of  quality human capital,  thereby  increasing  their  probability  of being  unemployed.    

 8. Ineffective  planning and  information  catering  system  has further made  it  difficult to disseminate  information regarding  various employment  generation schemes and plans and consequently  people lack  awareness.   

 ECONOMIC CONSEQUENCES OF UNEMPLOYMENT: 

1.Underutilisation  of  Human  Capital-  Country  fails to utilise its  human resources optimally  due  to high unemployment rates.

2.The rate of  capital formation  declines  due  to the  inability  of rising  unemployed population to save  and invest. 

3.  Due to high unemployment rate the  aggregate  output  for  the economy  will  also be low.

 4.  Reduces  Productivity-  Per capita  productivity  remains low due  to widespread unemployment, poverty  and inferior  quality  of human capital. 

STEPS TO SOLVE PROBLEM OF UNEMPLOYMENT

1.Steps to increase productivity levels  lead to  higher profits that in turn results in higher investment and  generates higher demand  for labour.   

2. Providing assistance  to self  employed persons-  Government should provide facilities like  credit, better seeds and irrigation to small and marginal farmers.    

3. Controlling population-  People should be made  aware  of various birth control measures and  also the  benefits associated with family  planning  and nuclear-family.

4.  Development of  infrastructure  such  as dams, bridges,  canal,  roads, etc.

 5.Increase in  investments  in  developing  human  capital-  technical education, imparting  skills, on-the-job training, quality  medical facilities, etc.

 6. Policy re-formulation and special plans focusing  on the  development of  the  small scale and  cottage  industries  such  as easy  and  cheap credit  facility.

7.  Encouraging  private  investments in  industrial  sector  via  financial concessions such tax  holidays,  etc. 

8. Increasing production  in the  agricultural  and industrial sectors in order to  increase employment opportunities.  

9. Use of  labour  intensive technique  rather  than an  undue  reliance  on capital intensive techniques of  production. 

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Note: The work is collected from various sources and author does not claim over work.

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HUMAN CAPITAL FORMATION - Education for free

HUMAN CAPITAL FORMATION - CLASS 12 ECONOMICS

1.  PHYSICAL CAPITAL  includes inputs which are required for the production like plant and machinery, raw materials,   etc..

2.HUMAN CAPITAL refers to the stock of skill, ability ,expertise, education. and knowledge  embodied in the people. Human capital is needed to make effective use of physical capital.

3. CAPITAL FORMATION refers to development of abilities and skill among the population of country.

• SOURCES OF HUMAN CAPITAL FORMATION

1. Expenditure on education:  educated person is more than that of an uneducated person. individuals invest in education to increase the future income and raise the living standard.

2. Expenditure on health:  it is important to build and maintain productive labour force and to improve quality of life of people in the society.

3.  on the job training:  it increases the skill and efficiency of workers and leads to an increase in production and productivity.

4. Expenditure on Migration:  source of human capital formation as enhance awnings in the migrated place is more than the increase in cost due to migration.

5. Expenditure on Information:  necessary to make decision regarding investment in human capital as well as for efficient utilisation of the acquired human capital stock.

• IMPORTANCE OF HCF

 1 effective use of physical capital

 2 higher productivity and production

 3. Innovation and create ability to absorb new technologies

4.  modernization of attitudes

5.  increases life expectancy and improve quality of life

6.  control of population growth

• PROBLEMS OF HCF

1.  insufficient resources

2.  serious inefficiencies

3.  Brain drain

4.  High growth of  population

5.  several imbalances

6. lack of proper manpower planning

7.  weak Science and Technology

• HUMAN CAPITAL VS HUMAN DEVELOPMENT

 1 Human capital considered as education and health as a means to increase labour productivity while according to human development education and health and integral to human being.

2.  human capital reach human being as a means to increase in productivity while according to human development human beings are ends in themselves.

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Note: The work is collected from various sources and author does not claim over work.

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LPG POLICY (1991) - CLASS 12 COMMERCE - D. Panjrolia

LIBERALISATION , PRIVATISATION AND GLOBALIZATION ( 1991)

- In order to overcome  crises of 1990’s, the  Government  of  India initiated multi-dimensional economic  reforms, which  are  collectively  known as  New  Economic  Policy  (NEP). 

-The New Economic  Policy  replaces liberalisation in place  of licensing  (L),  privatisation in place  of Quotas (Q)  and  globalisation in place  of  Permits  (P) for  exports and imports. 

-  NEED FOR ECONOMIC REFORMS

1.HUGE FISCAL DEFICIT:  Gross fiscal deficit (excess of government expenditure  over government revenues)  rose  from 5.7%  to 6.6% of  GDP  during  1980-81  to  1990-91.

2. WEEK BOP : India was not  able to earn enough foreign exchange  through exports to finance  its imports.  The  comparatively  high demand  for  imports  than exports resulted in BOP  deficit. 

3.HIGH LEVEL OF INFLATION:  The  rate of inflation rose  from 6.7% p.a. to 10.3%  p.a. during  1980s to 1990-91  depicting  the  failure  of  government policies to control inflation.

4. FALLING IN VALUE OF RUPPE:  The  need to mend the value  of currency  (value  fell  due  to continuous devaluation)  and to encourage  the  credit  worthiness of  India, reforms became necessary.

 5. SICK PSU(S):  The  failure  of PSUs to perform its roles efficiently  and effectively  made economic  reforms inevitable.   

THE THREE ELEMENTS of New Economic  Policy  (NEP) are  Liberalisation, Privatisation  and Globalisation. 

* LIBERALISATION refers to the freedom of the  economy  from direct or physical controls (such as, industrial licensing, price  control, import license) imposed by  the  government.  It implies greater dependence  on the market for making  various economic  decisions.

 * Economic Reforms under  Liberalisation 

1 INDUSTRIAL SECTOR REFORMS

 *Liberalisation implies  de-regulation  of  industrial sector of  the  economy.

 * Abolishment of  license  requirements, except licenses for  alcohol, industrial explosives etc. 

* Encouragement and impetus to the private  sector via liberal tax  laws, tax holidays, abolishment of  quotas, etc.

* Large  scale industries were  allowed to produce  goods and services that were initially  reserved only  for  small  scale industries. 

2.FINANCIAL REFORMS-  Reforms in  Commercial  Banks, Stock  Exchange, Investment Banks 

 *It refers to the process of  liberalising  the working  of  financial markets by eliminating  various controls. 

*The role of  RBI  shifted from a  regulator  to  a  facilitator.  The  need  for  financial reforms was felt  to encourage  competition in the  banking  sector.   

* Foreign  Institutional  Investors (FII)  such  as merchant bankers, mutual funds, pension  funds were  encouraged to invest  in  India.

FISCAL POLICY REFORMS

 1. The reforms that relate  to revenue  and expenditure  of the  government  are referred to  fiscal policy reforms.  The  principal component of  fiscal reforms is  tax reforms.

 2.Tax reforms involved-  lowering  tax  rates and broadening  tax  base.

 3.Corporation tax  rates were  lowered.

 4.Reforms in indirect taxes for  establishing  an integrated national market.

 5.The tax  system has been  simplified, which was earlier  very  complicated.  

  

EXTERNAL SECTOR REFORMS

 It includes  foreign  exchange  reforms and  foreign  trade  policy reforms.  

 * Abolishment of  import  licensing  and  QRs  on the  imports of  capital goods and  intermediate  goods.

 *Switch  over  to  flexible  exchange  rate  regime  (exchange  rate  determined  by the  demand  and  supply  of  the  foreign  exchange)  from  fixed  exchange  rate regime  (exchange  rate  fixed by  the  government). 

*Devaluation 

It implies deliberate  official lowering  of  the value of  the country’s currency  with respect to  foreign currency.  That is, the value of  domestic  currency  falls in terms of foreign currency. 

 * This encourages exports and discourages imports.  

PRIVATISATION is the  process of involvement of  private sector in the  ownership or operation of  a  state  owned enterprise.  

 *

Disinvestment  refers to  a  situation when the  government sells off a  part of  its share  capital of  PSUs (Public  Sector Undertakings) to the private  investors. 

*  Navaratnas  Policy In 1966,  in order to improve  efficiency, to infuse  professionalism and to enable PSUs to compete  effectively  in the  market,  government awarded the status of  ‘Navaratnas’  to the following  nine PSUs.  These  are

 *  Indian  Oil Corporation  Ltd (IOCL) 

* Bharat Petroleum Corporation  Ltd (BPCL) *  Hindustan Petroleum  Corporation  Ltd (HPCL)

 * Oil and Natural Gas Corporation  Ltd (ONGC) 

*  Steel Authority  of  India  Ltd (SAIL)   India Petro-chemicals Corporations  Ltd  (IPCL)

 * Bharat Heavy  Electricals  Ltd (BHEL)

 *  National  Thermal Power  Corporation (NTPC) 

* Videsh Sanchar  Nigam  Ltd (VSNL) 

 GLOBALISATION may  be  defined as a process  associated with increasing  openness, growing economic  independence  and promoting  economic  integration in the  world  economy.  It is an extension of liberalisation and privatisation.  

OUTSOURCING

IT refers to a  system of hiring  business  services from the outside  world to penetrate in the local market.  

 *India is emerging as an  important destination  of  outsourcing 

 *Easy Availability of  Cheap  Labour-  Wage  rates in  India  are  comparatively  lower than those  in developed countries.

 *Indians have  fairly  reasonable degree  of  skills  and techniques. 

* India has a fair  international  worthiness  and credibility.  

*  India has a virgin market  for  finished  goods and services.

 *The democratic  political environment in  India provides a  stable  and  secure environment. 

*  Easy and abundant availability  of  raw  materials. 

*  WORLD TRADE ORGANISATION  (WTO)  is an organisation that has been set up  to promote  free trade  in the  international market.

 * BENEFITS to  be  a Member  of  WTO-  India’s Experiences

 1.Opened up new avenues  for  Indian exports.   

2. Greater volume of  Indian  exports due  to the  end of  quota restrictions  imposed  by  the developed countries.  

3. India  experienced a  rise in export of  agricultural products due to the  agreed  reduction in agricultural subsidies in developed countries.

4  India  got  equal opportunity  as other developing  countries did. Simultaneously,  India experienced a  stronger bargaining  power collectively  along  with other developing countries. 

" Reasons for  Poor  Performance  of Agricultural Sector  in  Post Reform  Period "

1.Reduction of  public  investment  such as  irrigation facilities, electricity, information system, agricultural R  &  D, market linkages  and roads.  

 2.  Removal of  subsidies  pushed up the cost of production of  agriculture  which adversely  affected poor and marginal farmers.

 3. Liberalisation  forced the poor  and marginal farmers to compete  with  their  foreign counterparts in the  international markets.  

 4. Shift towards cash crops  led to the reduced availability  of food  grains, which consequently  led to  lower nutritional values thereby  reducing  farmers’  productivity. 

5.  Inflationary pressures on  food  grains  due  to  the  shift towards cash  crops production along  with the  removal of  subsidies.  

 REASONS FOR POOR PERFORMANCE OF INDUSTRIAL SECTOR.

1..  Availability  of  cheaper  imports  (due  to the  removal of import tariffs)  led to the  fall in the  demand of  domestic  goods.

2..Inadequate  infrastructures  and facilities (including  power supply)  impaired the domestic  firms to compete  with foreign counterparts in terms of  cost of production and quality  of  goods.   

3..  High non-tariffs  barriers  by  the  developed  countries further  obstructed the  growth prospects of  Indian industries. 

** At the time  of liberalisation, the  Indian industries  were  vulnerable and  infant depending  on the traditional and cost inefficient technologies, lacking  quality  and hence  failed to compete  with foreign industries.   

* STRATEGIC SALES. refers to the sale of  51%  or more  stakes of a  PSU to the private sector,  (the highest bidder  for  sale).  It implies the  transfer of  ownership to the  private hands.   

* MINORITY SALES refers to the sale of  less than 49%  stake  of a  PSU to the private sector.  The ownership remains in the hands of the  public  sector. 

* BILLATERAL TRADE is a trade  agreement between two  countries, providing  equal opportunities to both of them.

 *MULTILATERAL TRADE  is a trade  agreement  among  more  than two countries providing  equal opportunities to all  the member  countries.   

* TARIFF BARRIERS  refer to the  tax  imposed  such  as custom duties, export-import duties on the imports by  the country  to  protect its domestic  industries.  Tariffs discourage  imports by making  them relatively  expensive. 

* NON TARIFF BARRIERS  refer to the  restrictions  other  than taxes such as  quota and licenses, on the imports by  the  country.

 * QUANTITATIVE RESTRICTIONS(QRs)  refer to the  restrictions in the form of limits or quotas on the amount  of commodities that can either be  imported or  exported. QRs usually  on imports (refer to non-tariff measures) that are  imposed  to discourage  imports of foreign  goods and to reduce  Balance  of Payment (BOP) deficits. 

* DIRECT TAXES  are  those taxes in which the burden falls on that person only  on whom tax  is imposed  such  as income  tax, wealth tax. 

 * INDIRECT TAXES denote those taxes in which the burden can be  shifted onto  others such as sales tax, service  tax  etc.

 

 POSITIVE IMPACT of  LPG  policies

** Increase in  the  GDP Growth Rate-  Growth rate  increased from 5.8 % in  1985-90 (seventh five  year plan)  to 9.0 in 2007-12 (eleventh five  year plan).   

**A Safety  Check  on  Fiscal Deficit-  Fiscal deficit  reduced from 8.5%  in 1985-90 to 5.1%  in 2010-11. 

** Stimulating Industrial  Production-  Industrial production increased from  nearly  8% in 1990-91 to 16.1% in Feb. 2010.

**  Substantial  Rise  in  the  Foreign  Exchange  Reserves-  Introduction of  LPG has given strength to the economy  and  raised the morale of  global investors in  the  Indian markets. 

**  Shift from  Monopoly (due  to License  Raj)  to Competitive Market (involving more  engagement of  private  sector) 

**  Rise  in  exports  from Rs 44041.8 crores in 1991-92 to Rs 1157474.6 crores  in 201011.

 ** Foreign  Direct Investments (FII) increased  significantly  from US  $ 100 million in 1990-91 to US$ 150 billion in 2003-04. 

NOTE: the author does not claim over content. It has been derived from various sources.

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