Senior Inter Economic Study Material

Senior inter Economics study Material prepared by Mr.harish Sharma





New Document(1)-1
1. Explain the features of developing country with special reference to India.
2. Explain the role of International trade in economic development.
3. Advantages and disadvantages of privatisation in India.
4. What are the causes for rapid growth of population in India.
5. What are the causes and measures for inequalities in the distribution of income and wealth.
6. What are the causes for unemployment and measures to reduce unemployment?
7. What are the causes for low productivity in agriculture? Explain the measures to improve it.
8. Explain the problems faced by small scale industries.
9. What is tourism? Explain its importance in Indian economy.
10. Explain causes for regional imbalances in India.
Senior inter Economics study Material:    5 MARKS QUESTIONS:
1. Distinguish between economic growth and development.
2. What are the factors influencing economic development.
3. Public  sector policy in liberalization.
4. Differences between GATT and WTO.
5. Explain the role of education in economic development.
6. National Rural Health Mission.
7. Describe the impact of green revolution in  India.
8. What are the causes for rural indebtness.
9. Write an essay on role of NABARD in rural credit.
10. Causes for industrial backwardness in India.
11. Industrial estates advantages.
13. Describe Bharat Nirman
14. Explain the progress of software industry in India.
15. What are the renewable and non-renewable sources – Explain.
16. Suggest measures for conservation of forest.
17. Rural and urban housing facilities in TS.
18. Role of IT in Economic development of TS.
2 Marks Questions:
1. Per capital income    2. Planning commission    3. MRTP    4. Disinvestment
5. Maternal, Infant, total fertility rate    6. Urbanisation    7. Service sector
8. Literacy rate    9. Mixed economy    10. Poverty line    11. Poverty gap
12. Absolute poverty    13. Relative poverty    14. Zamindari system
15. Rythu bazars    16. Industrial finance    17. UTI, SFC, SIDBI    18. HDI
19. Industrial estates    20. Eco system.

Senior inter Economics study Material: Unit – I

of the lesson – Economic Growth and Economic Development.

1 Q: What are the differences between Economic Growth and Economic Development?

The problems of developed and under developed countries are not same in nature. To discuss and elevate such problems we use the terms Economic Growth and Economic Developed. Though they synonyms each other, they are quite different in meaning in economic literature.

Economic Growth: The increase in real output of goods and services of the economy is called as “Economic Growth”. It indicates only quantitative changes of the economy. This concept is related to developed countries.

Economic Development: The overall progress of the economy along with institutional and technological changes is called as “Economic Development. It indicates both quantitative and qualitative changes of the economy. This concept is related to under developed countries.

Difference between growth and development:

Economic Growth – Economic Development:
1. It indicates only qualitative 1. It indicates both qualitative changes. and quantitative changes.
2. It is a uni-dimensional concept. 2. It is multidimensional concept.
3. It is a narrow concept. 3. It is a broad concept.
4. Govt. play nominal role in 4. Govt. play dominant role in this concept. this concept.
5. It is related to developed countries. 5. It is related to under developed countries.
6. It is a short run process. 6. It is a long run process.

2 Q. Explain the factors that determine economic development?

Factors Determining Economic Development:

1. Natural resources: According to Jacob Viner, Bawmol and W.A. Lewis, a country’s developed is determined by natural resources like fertility of soil, irrigation, mineral like coal, petroleum etc.

2. Capital Formation: Increase in the net stock of the capital is called as capital formation. It helps to create sound infrastructure and enlarges the productive capacity.

3. Marketable Surplus: The excess amount of output available in agricultural sector after meeting the basic needs of rural people is called as marketable surplus. More marketable surplus leads to economic development.

4. Foreign Trade: Foreign trade provide sufficient investment, technology, managerial abilities and enlarge the market. so it is described as an engine of growth.

5. Human resources: Population of the country is called as human resources. The quality population of any country provide skilled and efficient labour and managerials.

6. Technical progress: The availability of latest and sophisticated technology minimise cost of production, maximise output and change the social atmosphere.

7. Political freedom: If any country is under the rule of other country, they may be exploited and forced to remain backward. So political freedom is essential for economic development.

8. Desire to develop: Richard T. Gill says that, the economic development is not a mechanical process but it depends on the skills, quality and attitudes of the people.

Classification of the Countries:

World Bank classified the countries of the world on the basis of per capita Gross National Income. (As per WDR-2008)

Sl. No. Category Range of GNI

1. Low Income Countries – Below 906 dollars
2. Middle Income Countries – $ 907 – $11115
3. High Income Countries – $ 11116 and above

3 Q. What are the features of developed Countries?

DEVELOPED COUNTRIES: The countries with high Per Capita Income are called as developed countries. They are also called as industrial and emerging economies. According to World Development Report (2008), they have 16 percent of world population with 77 percent world GNI. Eg: USA, UK, Switzerland.


1. High Per Capita Income: Developed Countries Possess higher per capita as well as gross National Income.
Eg: The PCI of switzerland is $65330, USA is 47,580.

2. Importance of Non-agricultural Sector: In developed countries non-agricultural sector (industry & Services) provide
more share to GDP and employment for majority of population. Eg: In U.S.A. industrial sector provide 22 percent Service Sector provide 76 percent share in GDP and employment for 96 percent population.

3. High level Capital and Technology: Due to high level saving rates, investment and PCI, the developed countries are maintaining high level capital formation and technical progress.

4. Low level unemployment: There is very low level of unemployment in these countries due to the domination
of non-agricultural sector. We find cyclical and frictional unemployment is some extent.

5. Better Quality of Life: In these countries all citizens are ensured with minimum standard of life with
Social Security. There are low level death and birth rates, high level literacy rate etc. due to higher human capital.

4 Q: Explain the features of under developed countries with reference to India?

Under Developed Countries: According to Indian Planning Commission, An under developed country is characterised by the greater or lesser degree of un utilised or under utilised man power on one hand and unexploited natural resources on the other hand. These are also called as third world countries, agrarian economies and developing countries. They have 84 percent World population with only 23 percent of World GNI. Eg: India, Srilanka etc.

Features with Reference to India:

1. Low Per Capita Income: Under developed countries have lower PCI due to low level savings and investment.
India’s PCI is $1070 which is 45 times less than that of USA.

2. Scarcity of Capital: In most of countries, the saving rates range between 15 to 20 percent. So, it leads
to low level capital formation. As per Ragnar Nurkse, many of these are in vicious circles of poverty due to scarcity of capital. Now India’s capital formation rate is 39 percent of GDP.

3. Demographic Characters: Many countries are suffering with population explosion, high level death rates,
birth rates, etc. 84 percent of world population is in developing countries only. As per 2011 Census, India’s population is 121 Crores, which is 17 percent of world population.

4. Unemployment: These countries are suffering with disguised and cyclical unemployment due poverty and market failure. In India disguised unemployment ranges between 15 to 20 percent.

5. Predominance of agriculture: In developing countries agriculture provide 20 to 30 percent of share in GDP and
employment opportunities for nearly 70 to 80 percent. In India agriculture provide 58 percent employment opportunities and 18 percent share to GDP.

6. High Incidence of Poverty: Most of under developed countries are suffering from high poverty levels along
with malnutrition, poor quality of life, ill-health and literacy. In India 19.3 percent people are living below poverty line.

7. Income inequalities: There are large inequalities in income and wealth distribution in these countries due to private ownership, tax evasion etc. It widens the gap between haves and have not’s.

8. Poor Quality of Life: In these countries there is low level literacy, income, health facilities, sanitation,
safe drinking water, life expectancy, etc… In India life expectancy is 63.4 years with 74 percent literacy rate.

9. Technological backwardness: Capital deficiency is the main reason for technical backwardness. There is a technological dualism in almost all sectors of the economy.

10. Density of Population: The average number of persons living per square kilometre area is called as density
of population. High density of population in these countries increase the burden on land and other resources. At present India’s density of population is 382 persons per square km. area.

Andhra Pradesh Economy:

Andhra Pradesh is the fourth largest state in area with 8.37 percent of land area of India and fifth largest state in terms of population with 8.46 crores. It posses 7 percent of India’s population with 1.06 percent growth rate. At present the sex ratio is 992 per 1000 males.

At present 59.7 percent of population in agriculture, 15.5 percent in industrial sector and 24.8 percent in Service Sector is engaged in Andhra Pradesh. AP is one of the largest states in India among high Per Capita Income States.

Important Questions:

Long Answer Questions: (10 M)

1. What are the factors that influence economic development?
2. Explain the features of developing countries with reference to India.

Short Answer Questions: (5 M)

1. Distinguish between Economic Growth and Economic Development.
2. What are the features of developed countries?

Very Short Answer Questions: (2 M)

1. Per Capita Income.
2. Economic Development.
3. World Bank’s Classification of Countries.
4. Dual Economy.
5. Marketable Surplus.

Unit 2 :-

New Economic Reforms : International trade plays an important role in the economic development. It acts as an engine of growth. According to Haberler, it is most useful for under developed countries.

Role of International Trade:

1. Increases Output:
In International Trade, a country specialises in production of goods. So it will increase the output, income and growth of that country.

2. Market Expansion:
Wide range of production of various types of goods widen the scope for market expansion and increases the investment capacity in that country.

3. Employment generation:
Market expansion, high level investment capacity due to international gains can also create enough employment opportunities for growing population.

4. Increase Internal and External Economies:
More sophisticated and modern technology and huge investment utilisation in international trade can also provide internal and external economies to the country which controls the cost of production.

5. Indirect benefits:
It provide some indirect advantages like inventions and innovations, import of technology, capital accumulation, managerial talents etc. to the economy.

6. Import of Capital goods:
Under developed countries are scarce in capital goods. So they can developed their social and economic infrastructure by importing capital goods at cheap rate from other countries.

7. Educative effect:
Developing countries have lack of technical knowledge, managerial skills, entreprenuership etc. Due to low level education, this can be minimised by importing them through international trade.

8. Source of foreign capital:
A country gain advantages in international trade in exports and imports. It provide foreign capital as balance of payments.

9. Controls monopoly power:
Import of goods from other countries can control the development of monopolies in the economy and leads to healthy competition.

10. Promotes world peace:
It promote economic cooperation, brotherhoodness and mutual understanding between world countries which leads to world peace.

Evaluation of “LPG” Concept:
India followed a very restrictive economic policy upto 1991. Over dependency on public sector and neglegency on private sector badly effected the Indian Economy. To overcome such economic depression, the congress government introduced the “Rao-Manmohan Model” in 1991. This is popularly know as Liberalisation, Privatisation and globalisation (LPG) Model.

Relation of previous govt. restrictions in the areas of social and economic policies is called as liberalisation. It is nothing but liberalisation in trade restrictions on the flow of goods and services between countries.
(1) To make it free the Indian economy from the clutches of bureaucratic control.
(2) Integrating Indian economy with world economy.
(3) To remove restrictions on Foreign Direct Investment.
(4) To concise the unprofitable public sector units.
Govt. of India introduced New Economic Policy in 1991 to fulfil the aims of liberalisation by covering liberalised licensing, foreign direct investment, foreign capital and technology, MRTP Act and dilute of public sector.


According to Barbara Lee and John Nellis, privatisation is the general process of involving the private sector in the ownership or operation of state owned enterprises. It is nothing but the private purchase of all or part of a company.
1. It improves efficiency and performance of the company.
2. It develops individual responsibility.
3. It promotes discipline in capital market.
4. Avoid the political interference.
5. Practices succession planning.
6. Quick response and spot decision is possible.
7. Early remedies for problems.
8. Provide quality and better service.


The process of integrating various economies of the world without creating any obstacle in free flow of goods and services, technology, capital and human resources is called as globalisation. It is nothing but making the domestic economy a part and parcel of world economy.

Support in Factors:
Quality human resources, wide industrial base, growing specialised markets and entrepreneurship, expanded markets, economic liberalisation, growing GDP, NRI’s etc in Indian economy favours globalisation.

High input cost, poor infrastructure, old technology, poor brand image, small sized companies, limited marketing research etc. are the obstacles of globalisation in India.

The General Agreement on Tariffs and Trade (GATT):
The General Agreement on Tariffs and Trade (GATT) was come into force on 1st, January 1948. Its main aim is to eliminate the trade restrictions in international trade. Its head quarters were situated at Geneva. It disappeared on 1st Jan. 1995 with the birth of World Trade Organisation.

1. To follow Most Favoured Nation Principle unconditionally.
2. To grand protection to domestic industry.
3. To carry on the trade on non-discrimination principle and transparency.
4. To liberalise tariff and non-tariff measures.

World Trade Organisation (WTO):
The World Trade Organisation (WTO) was came into force from 1st January 1995 and the general agreements were converted into permanent setup. Its head quarter is at Geneva. At present (2011) there are 153 member countries in WTO including India.
1. To improve standard of living, full employment and effective demand.
2. To expand trade and production.
3. To ensure optimum utilisation of world resources.
4. To reduce tariff and other barriers.
5. To eliminate discriminatory treatment in trade.
6. To develop integration among world countries.
1. Implementation of Multilateral agreements.
2. Make frame work for plurilateral agreements.
3. Decide future strategies of trade and tariffs.
4. Administrator rules and procedures of dispute settlement.
5. Cooperates with World Bank and International Monetary Fund.
Agreements under WTO:
1. Removal of quantitative restrictions on agricultural imports.
2. Reduce agricultural subsidy.
3. Reduction of tariffs.
4. Removal of restrictions on foreign investment.
5. Grant protection to TRIPs.
6. Agreements on Services.
7. Maintain the basic standards of human and environment in production.
8. Settlement of disputes.

Role of WTO in Indian economy`:

As a member of WTO, India agreed to bound to 67 percent tariff on agricultural
goods, 40 percent for non-agricultural goods and 25 percent for intermediary
goods, machinery etc.
As per WTO agreements, India removed quantitative restrictions on 714 items in 2000 and 715 items in 2001-EXIM POLICY.
The Patents Amendment Act 2005 provides patents to drugs, farm products and plant varieties.
Indian govt. allowed foreign investment in Pharma Products and 22 types of consumer goods.
India made commitment in 33 activities of service sector for foreign service providers.

Important VSAQ:

(1) Most Favoured Nation: It indicates that any concession given to any nation was automatically extended to all the member countries of GATT. It is one of the provisions of GATT.

(2) Disinvestment: The Sale of Public Sector equity to the private sector is called as disinvestment. It is part of evolution of privatisation in India.

(3) Foreign Direct Investment: Investment in a foreign country where the investor retain control over the investment is called as FDI. AT present 100 percent FDI permitted except retail trading, atomic energy, lottery business, gambling and betting.

(4) TRIPs: Trade Related Intellectual Property rights refers to the legal ownership of an invention or discovery attach to a particular product or process. it protects the owner against unauthorised copying. Eg: Copy rights, patent rights, trade mark etc.
(5) Liberalisation
(6) Privatisation
(7) Globalisation.

Important SAQ
1. What are the advantages of privatisation?
2. What are the objectives of GATT?
3. What are the functions of WTO?
4. Distinguish between WTO and GATT.

Important LAQ:
1. Role of International trade in economic development.
2. What are the obstacles of globalisation in India?
3. Explain the role of WTO in Indian Economy.