Economics अर्थशास्त्र

Quick summary

Economics studies how people satisfy unlimited wants with limited means. This chapter covers Kautilya's views (Arthashastra), the meaning of economics, the definitions of Adam Smith, Alfred Marshall and Lionel Robbins, branches of economics (micro and macro), basic economic concepts, and types of economic systems.

Key points

• Kautilya (Chanakya / Vishnugupta), advisor in the Mauryan period, wrote the Arthashastra — 'Artha' = wealth, 'Shastra' = science. He stressed the role of the state, creation of wealth for welfare, and efficient administration.
• 'Economics' comes from the Greek word 'Oikonomia' — management of the household. Paul Samuelson called economics the 'Queen of Social Sciences'.
• Adam Smith (Father of Economics), Wealth of Nations (1776): wealth-oriented definition — economics is a science of wealth. Key ideas: laissez-faire, capital accumulation, natural law, division of labour.
• Alfred Marshall, Principles of Economics (1890): welfare-oriented definition — a study of mankind in the ordinary business of life, related to material requisites of well-being.
• Lionel Robbins, An Essay on the Nature and Significance of Economic Science (1932): scarcity-oriented definition — human behaviour as a relationship between ends and scarce means which have alternative uses. Wants are unlimited, means limited, wants can be graded, means have alternative uses.
• Branches: micro economics (individual units) and macro economics (aggregates); terms coined by Ragnar Frisch in 1933.
• Basic concepts: wants, goods (free and economic; consumer and capital goods), services, utility, value (value in use and value in exchange), price, wealth (utility, scarcity, transferability, externality), income (personal, disposable), investment.
• Economic systems: capitalism (private ownership, profit motive, market forces), socialism (state ownership, planning, equality), mixed economy (both public and private sectors — e.g., India).

Important terms

• Free goods – gifts of nature with no price (air, sunshine).
• Economic goods – scarce goods with a price.
• Personal disposable income – personal income minus direct taxes.
• Laissez-faire – no government interference in economic activities.

Important dates and people

• Kautilya – Arthashastra (Mauryan period).
• 1776 – Adam Smith, Wealth of Nations.
• 1890 – Alfred Marshall, Principles of Economics.
• 1932 – Lionel Robbins, scarcity definition.

5 important questions

Q1. Explain Adam Smith's definition of economics.

Economics is a science of wealth (1776). It stresses wealth creation, laissez-faire, capital accumulation and division of labour.

Q2. Explain the key points of Robbins' definition.

Wants are unlimited; means are limited; wants can be ranked by priority; means have alternative uses — so economics is about choice.

Q3. State the features of wealth.

Utility, scarcity, transferability and externality.

Q4. Distinguish between capitalism and socialism (two points).

Capitalism has private ownership and works on profit motive; socialism has state ownership and works for social welfare through planning.

Q5. What is a mixed economy?

An economy where public and private sectors exist together, e.g., India.

Exam tip

Learn each economist with his book and year; matching-pair questions use exactly these facts.

Quick summary

Before money, people exchanged goods for goods (barter), which caused many difficulties. This chapter explains the problems of barter, the definitions, evolution and types of money, its functions, and its importance and limitations in an economy.

Key points

• Barter system: direct exchange of goods for goods. Difficulties: lack of double coincidence of wants, lack of a common measure of value, difficulty in storing goods, indivisibility of goods, problem of deferred payments.
• Definitions: Prof. Crowther — money is anything generally acceptable as a means of exchange that also acts as a measure and store of value. Prof. Walker — "Money is what money does."
• Evolution / types of money: animal money (cattle), commodity money (grains, shells), metallic money, metallic coins (standard/full-bodied coins and token coins), paper money, credit money (cheques, bank drafts), plastic money (debit and credit cards), electronic money (net banking, mobile wallets, UPI).
• Primary functions: medium of exchange, measure of value.
• Secondary functions: store of value, standard of deferred payments, transfer of value.
• Contingent functions: basis of credit, distribution of national income, equalising marginal utilities, gives liquidity.
• Importance: removes barter difficulties, helps consumers and producers, encourages saving and investment, facilitates trade and specialisation, helps credit and economic growth.
• Limitations/evils: inflation and deflation, black money, inequality, materialism, debt.

Important terms

• Double coincidence of wants – both parties must want what the other has.
• Full-bodied coin – face value equals metal value.
• Token coin – face value higher than metal value.
• Legal tender – money that must be accepted for payment by law.

Important dates and people

• Prof. Crowther and Prof. Walker – definitions of money.

5 important questions

Q1. Explain the difficulties of the barter system.

Lack of double coincidence of wants, no common measure of value, storage problems, indivisibility of goods, and difficulty in deferred payments.

Q2. Explain the primary functions of money.

Medium of exchange — goods are bought and sold through money; measure of value — values of goods are expressed in money.

Q3. Explain the secondary functions of money.

Store of value, standard of deferred payments and transfer of value from one place or person to another.

Q4. Distinguish between full-bodied coins and token coins.

Full-bodied coins have face value equal to metal value; token coins have face value greater than metal value.

Q5. What is plastic money and electronic money?

Plastic money: debit and credit cards. Electronic money: payments through net banking, mobile wallets and UPI.

Exam tip

Write the classification of functions (primary, secondary, contingent) as a chart before explaining — it shows clarity.

Quick summary

Partition values divide an ordered set of data into equal parts. The median divides it into two equal parts, quartiles into four, deciles into ten and percentiles into hundred. This chapter explains their need and how to calculate them for individual, discrete and continuous (grouped) data.

Key points

• Measures of central tendency (mean, median, mode) give one central value; partition values show the position of values in different parts of the data.
• Data must first be arranged in ascending order.
• Quartiles: Q1, Q2, Q3 divide data into 4 equal parts; Q2 = median.
• Deciles: D1 to D9 divide data into 10 equal parts; D5 = median.
• Percentiles: P1 to P99 divide data into 100 equal parts; P50 = median. Percentiles are used in competitive exam results and income studies.
• Relations: Q1 = P25, Q2 = D5 = P50, Q3 = P75.
• For individual and discrete data, use the (n + 1) rule and the cumulative frequency (c.f.) column.
• For continuous data, use N/4, N/10, N/100 (not N + 1) to find the class, then the interpolation formula.
• Steps for grouped data: (1) find c.f.; (2) find the position iN/4 (or iN/10, iN/100); (3) locate the class whose c.f. first equals or exceeds it; (4) apply the formula.

Important terms

• Partition values – values dividing data into equal parts.
• Cumulative frequency (c.f.) – running total of frequencies.
• Quartile class – class in which the required quartile lies.

Formulas

• Individual/discrete data: Qi = value of [i(n + 1)/4]th item; Di = value of [i(n + 1)/10]th item; Pi = value of [i(n + 1)/100]th item
• Continuous data: Qi = L + [(iN/4 − c.f.)/f] × h
• Di = L + [(iN/10 − c.f.)/f] × h; Pi = L + [(iN/100 − c.f.)/f] × h

(L = lower limit of the class, c.f. = cumulative frequency of the class before it, f = frequency of the class, h = class width, N = total frequency)

5 important questions

Q1. Find Q1 and Q3 for: 10, 12, 15, 18, 20, 22, 25.

n = 7. Q1 = (7 + 1)/4 = 2nd item = 12. Q3 = 3(8)/4 = 6th item = 22.

Q2. Find D4 for: 5, 8, 10, 12, 15, 18, 20, 22, 25.

n = 9. D4 = 4(10)/10 = 4th item = 12.

Q3. Classes 0–10, 10–20, 20–30, 30–40 have frequencies 5, 8, 12, 5. Find Q1.

N = 30, c.f.: 5, 13, 25, 30. N/4 = 7.5 → class 10–20. Q1 = 10 + [(7.5 − 5)/8] × 10 = 10 + 3.125 = 13.125.

Q4. For the data in Q3, find the median (Q2).

2N/4 = 15 → class 20–30 (c.f. 25). Q2 = 20 + [(15 − 13)/12] × 10 = 20 + 1.67 = 21.67.

Q5. Why are partition values needed?

To know the position and spread of values in large data — e.g., top 10% of students (P90), income groups, ranks in exams.

Exam tip

Always show the c.f. column and state the class before using the formula — step marks are given for each.

Quick summary

Maharashtra is one of India's most developed states. This chapter describes the important features of Maharashtra's economy, its administrative divisions, and the condition, problems and government measures in its three sectors — agriculture, industry and services — along with infrastructure.

Key points

• Maharashtra is the second largest state by population (11.24 crore in 2011) and the third largest by area (about 3.08 lakh sq. km).
• It is the most urbanised state, with 45.20% of people living in towns and cities.
• 36 districts under 6 revenue divisions: Mumbai (Konkan), Pune, Nashik, Aurangabad, Amravati and Nagpur.
• 2011 census: sex ratio 929 females per 1000 males; literacy rate 82.3%.
• The state had the highest GSDP and per capita income growth among states (Economic Survey 2016-17); it has natural resources, skilled manpower, technology and developed infrastructure.
• Agriculture: share in Gross State Value Added fell from 15.3% (2001-02) to 12.2% (2016-17). Problems: small land holdings, more marginal farmers, excess fertilisers, indebtedness, poor land reforms, dry land and poor irrigation, lack of capital and marketing, climate change.
• Government measures for agriculture: quality seeds, more fertilizer outlets, irrigation, electricity, crop insurance, loans and market facilities.
• Industry: Maharashtra ranks first in the Annual Survey of Industries; industry's share in net value added is about 18%. Measures: single window clearance, MAITRI facilitation cell, export awards, Special Economic Zones (SEZ), cluster development programme for MSMEs.
• Service sector: banking, insurance, tourism, IT, education, health; the largest contributor to the state's income. Internet subscribers (5.45 crore in 2017) were the highest among states.
• Infrastructure: economic (roads, railways, ports, power, communication) and social (education, health, housing, sanitation).

Important terms

• GSDP / GSVA – Gross State Domestic Product / Gross State Value Added.
• SEZ – Special Economic Zone with special benefits for exporters.
• Marginal farmer – farmer with less than 1 hectare of land.

Key facts

5 important questions

Q1. State any four features of the economy of Maharashtra.

Second most populated state; third largest by area; most urbanised; highest internet subscriber base.

Q2. Explain any four problems of agriculture in Maharashtra.

Small land holdings, dependence on rain and poor irrigation, farmers' indebtedness, lack of marketing facilities.

Q3. State the measures taken by the government for industrial development.

Single window clearance, MAITRI cell, Special Economic Zones, awards and subsidies for exporters, cluster development for MSMEs.

Q4. Name the six revenue divisions of Maharashtra.

Mumbai (Konkan), Pune, Nashik, Aurangabad, Amravati, Nagpur.

Q5. What is social infrastructure? Give examples.

Facilities that improve the quality of human life — education, health, housing, sanitation and drinking water.

Exam tip

Learn the key figures table — fill-in-the-blank questions use these exact census numbers.

Quick summary

Most Indians live in villages, so the progress of India depends on rural development. This chapter explains the meaning and significance of rural development, the role of agriculture, industry and services in rural areas, and agricultural credit — its types and sources (non-institutional and institutional, such as NABARD, co-operatives, commercial banks and regional rural banks).

Key points

• Rural development (World Bank): a strategy to improve the economic and social life of a specific group — the rural poor.
• Rural economy has three sectors: agriculture (mechanisation, high-yielding seeds, credit, transport, marketing), rural industries (technical skill, agro-based industries) and services (health, family welfare, banking, communication).
• Significance: better public health and sanitation, higher literacy, empowerment of women, law and order, land reforms, infrastructure (electricity, roads, irrigation), availability of credit, eradication of poverty, employment, reduction of migration to cities.
• Agricultural credit by tenure: short-term (not exceeding two years — seeds, fertilisers), medium-term (up to 5 years — cattle, equipment, land improvement), long-term (more than 5 years — tractors, permanent land improvement).
• By purpose: productive (for farming) and unproductive (marriages, ceremonies, festivals).
• Non-institutional sources: moneylenders, traders and commission agents, landlords, relatives — usually high interest and exploitation.
• Institutional sources: NABARD (apex institution for agriculture and rural development finance, set up on 12 July 1982 with equal contribution from the Government of India and RBI), co-operative credit societies and banks, commercial banks, Regional Rural Banks (RRBs), self-help groups and microfinance.
• Problems of rural credit: inadequate and untimely credit, dependence on moneylenders, red tape, overdue loans.

Important terms

• Rural development – overall improvement of villages and rural people.
• NABARD – National Bank for Agriculture and Rural Development.
• Unproductive credit – loans that do not increase production.
• Self-help group (SHG) – small group of rural people, mostly women, who save and lend together.

Key facts

5 important questions

Q1. Define rural development and explain its significance (any four points).

Improving economic and social life of the rural poor. Significance: public health, literacy, women's empowerment, infrastructure.

Q2. Explain the types of agricultural credit on the basis of tenure.

Short-term (up to 2 years), medium-term (up to 5 years) and long-term (above 5 years) — see the table.

Q3. State the non-institutional sources of agricultural credit and their drawbacks.

Moneylenders, traders, landlords and relatives; they charge high interest, manipulate accounts and exploit farmers.

Q4. Explain the role of NABARD.

It is the apex bank for agriculture and rural development; it refinances co-operative and regional rural banks, supports rural infrastructure and supervises rural credit institutions.

Q5. Distinguish between productive and unproductive credit.

Productive credit is used for farming that increases output (seeds, tools); unproductive credit is used for consumption like weddings and festivals.

Exam tip

Classify sources of credit in a chart (institutional vs non-institutional) — it makes long answers easy to score.

Quick summary

India is the second most populous country in the world. This chapter explains the trends in India's population growth from 1911 to 2011, concepts like birth rate and death rate, theories of population (Malthusian theory and the theory of demographic transition), causes and effects of population explosion, and measures to control it.

Key points

• 2011 census: India's population was 121.02 crore; India has about 17.5% of the world's population but only about 2.4% of the land area.
• Census is held every 10 years.
• Trends: 1911–1921 marginal decline (25.2 crore to 25.1 crore) due to epidemics; 1921 = 'Year of Great Divide'; 1931–1941 positive growth; from 1951 steady increase; 1971–2001 population explosion; slowdown after 2001 (growth 1.4% per year in 2011).
• Birth rate: births per 1000 people per year. Death rate: deaths per 1000 per year. Survival rate = birth rate − death rate.
• Malthusian theory: population grows in geometric progression (1, 2, 4, 8…) while food supply grows in arithmetic progression (1, 2, 3, 4…). Checks: preventive (late marriage, moral restraint) and positive/natural (famines, epidemics, wars).
• Demographic transition theory — three stages: (1) high birth and death rates, low growth; (2) high birth rate, falling death rate, high growth (population explosion); (3) low birth and death rates, stable population.
• Causes of population explosion in India: high birth rate, falling death rate, early marriage, illiteracy, poverty, religious beliefs, preference for male child, lack of awareness about family welfare.
• Effects: pressure on land, unemployment, poverty, low standard of living, housing shortage, pressure on infrastructure, environmental damage.
• Measures: economic (more jobs, industrialisation, urbanisation), social (education, status of women, raising marriage age), family welfare programme (Family Planning Programme renamed Family Welfare Programme in 1979), health measures, mid-day meal, public awareness.

Important terms

• Population explosion – very rapid increase in population.
• Demography – study of population.
• Preventive checks – voluntary measures to reduce birth rate.
• Positive checks – natural calamities that increase death rate.

Key facts

5 important questions

Q1. Why is 1921 called the 'Year of Great Divide'?

Because population fell between 1911 and 1921 and increased continuously after 1921.

Q2. Explain the Malthusian theory of population.

Population grows geometrically while food grows arithmetically; imbalance is corrected by preventive checks or positive (natural) checks.

Q3. Explain the theory of demographic transition.

Stage 1: high birth and death rates, low growth. Stage 2: death rate falls, birth rate stays high, rapid growth. Stage 3: both rates low, stable population.

Q4. State any four causes of population explosion in India.

High birth rate, falling death rate, early marriage, illiteracy and poverty.

Q5. Suggest measures to control population growth.

Spread of education, improving status of women, raising age of marriage, family welfare programme and awareness campaigns.

Exam tip

Learn the population table and the year 1921 — they appear in 'give reasons' and 'complete the table' questions.

Quick summary

Unemployment means people who are able and willing to work at the current wage cannot get work. This chapter explains the meaning of unemployment as defined in India, types of rural and urban unemployment, related concepts like voluntary unemployment, underemployment and full employment, the causes of unemployment and measures to reduce it.

Key points

• Unemployment: persons in the working age group (15–59 years) who are able and willing to work at the prevailing wage but cannot get a job.
• As per NSSO: working less than 14 hours a week = unemployed; 15–28 hours a week = underemployed; working 8 hours a day for 273 days a year = employed on a standard basis.
• Rural unemployment: seasonal (no work in off-season in agriculture) and disguised (more people working than needed; their marginal productivity is zero).
• Urban unemployment: educated unemployment (mismatch between education and jobs), industrial unemployment (technological, frictional, cyclical, structural).
• Frictional: temporary, while changing jobs. Cyclical: due to depression in the business cycle. Structural: due to long-term changes in the economy. Technological: due to new machines replacing labour.
• Concepts: voluntary unemployment (not willing to work at current wage), involuntary (willing but no job), underemployment (working below capacity), full employment (all who want to work at current wage get work — a hypothetical state).
• Causes: jobless growth, increase in labour force, excessive use of machinery, lack of skill development, high expectations about jobs, slow growth of agriculture and industry, defective education system, seasonal nature of agriculture.
• Measures: promoting small-scale and cottage industries, skill development and vocational education, rural employment schemes, self-employment programmes, labour-intensive techniques, better infrastructure.
• Effects: poverty, wastage of human resources, social unrest and crime, inequality.

Important terms

• Disguised unemployment – extra workers whose removal does not reduce output.
• Seasonal unemployment – lack of work in certain seasons.
• Underemployment – work below one's capacity or for fewer hours.
• Jobless growth – growth of output without growth of jobs.

Key facts

5 important questions

Q1. Define unemployment. When is a person considered unemployed in India?

Inability of willing and able persons to get work at the current wage. As per NSSO, working less than 14 hours a week.

Q2. Explain seasonal and disguised unemployment.

Seasonal: farm workers without work in the off-season. Disguised: more family members working on a farm than needed; removing some does not reduce output.

Q3. Explain any three types of urban unemployment.

Educated unemployment, frictional unemployment while changing jobs, and technological unemployment due to machines.

Q4. State any four causes of unemployment in India.

Rapid growth of labour force, excessive mechanisation, lack of skill training, slow industrial growth.

Q5. Suggest measures to reduce unemployment.

Develop small-scale industries, vocational and skill education, rural employment programmes and encourage self-employment.

Exam tip

Learn the NSSO hour limits exactly — they are frequently asked as fill-in-the-blanks.

Quick summary

Poverty means the inability to meet basic needs like food, clothing, shelter, health and education. This chapter explains the meaning and concepts of poverty, the poverty line, rural and urban poverty, the extent of poverty in India, its causes and effects, and measures to remove it.

Key points

• Prof. Amartya Sen: poverty is not just lack of money; it is not having the capability to realise one's full potential as a human being. Poverty is multi-dimensional.
• Absolute poverty: inability to meet minimum basic needs; measured by the poverty line. Relative poverty: being poorer in comparison with others; shows inequality.
• Poverty line: an imaginary line separating the poor from the non-poor, based on per capita household consumption expenditure. NITI Aayog's task force defines it as the threshold expenditure needed to buy a basket of basic goods and services.
• Objectives of a poverty line: identify the poor, track poverty over time and region, plan anti-poverty expenditure.
• World Bank: poverty line of $1.90 per person per day (2011 PPP); on this basis 21.2% of India's population was below the line (as per textbook).
• Rangarajan Committee (constituted 2012, report 2014): poverty line for 2011-12 — rural ₹972 per month (₹32 per day), urban ₹1,407 per month (₹47 per day); poverty ratio rural 30.9%, urban 26.4%.
• Rural poverty: lack of land, jobs, irrigation, credit. Urban poverty: slums, unemployment, informal work.
• Causes: population explosion, slow economic growth, unemployment and underemployment, inequality of income and assets, inflation, illiteracy, poor infrastructure, social factors.
• Effects: malnutrition, child labour, crime, social unrest, low productivity.
• Measures: population control, more employment, land reforms, education and skill development, public distribution system, social security and anti-poverty programmes.

Important terms

• Poverty line – minimum consumption expenditure needed for basic needs.
• Absolute poverty – below the minimum level of living.
• Relative poverty – poverty compared to others in society.
• Multi-dimensional poverty – deprivation in health, education and living standard.

Key facts

5 important questions

Q1. Distinguish between absolute and relative poverty.

Absolute poverty is measured against minimum basic needs (poverty line); relative poverty compares income levels of different groups in society.

Q2. What is the poverty line? State its objectives.

Minimum consumption expenditure needed for basic needs. Objectives: identify the poor, compare poverty across regions and years, plan anti-poverty spending.

Q3. State the poverty line given by the Rangarajan Committee.

Rural ₹972 per month (₹32 per day) and urban ₹1,407 per month (₹47 per day) per person for 2011-12.

Q4. Explain any four causes of poverty in India.

Population explosion, unemployment, unequal distribution of income, slow economic growth.

Q5. Suggest measures to remove poverty.

Control population, generate employment, land reforms, education and skill development, public distribution system.

Exam tip

Quote Amartya Sen's view of poverty in long answers — it shows understanding beyond the definition.

Quick summary

In 1991 India faced a serious economic crisis — high inflation, a large fiscal deficit and very low foreign exchange reserves. The Government introduced the New Economic Policy (NEP) of 1991 based on Liberalisation, Privatisation and Globalisation (LPG). This chapter explains its objectives, features, components and effects.

Key points

• Background: balance of payments crisis, inflation, low foreign exchange reserves, inefficient public sector.
• Objectives: bring the economy into globalisation; reduce inflation; correct balance of payments; achieve higher growth; build foreign exchange reserves; economic stabilisation; better international trade relations; more private sector participation.
• Features: delicensing (compulsory licensing kept only for a few industries such as electronic aerospace and defence equipment, industrial explosives, hazardous chemicals and drugs, cigarettes), abolition of MRTP restrictions on big firms, encouragement to small sector, encouraging foreign investment, reduced role of the public sector, trade liberalisation, reforms in insurance and banking.
• Liberalisation: removing unnecessary controls and restrictions — delicensing, reduced import duties, free entry, market-determined interest rates.
• Privatisation: transfer of ownership/management from public to private sector. Measures: disinvestment (selling shares of public units, e.g., Maruti, VSNL), dereservation (industries reserved for the public sector reduced from 17 in 1956 to only railway transport and atomic energy now), National Renewal Fund for workers, FERA replaced by FEMA, Navratna status given to nine PSUs in 1997-98 (IOC, ONGC, HPCL, BPCL, IPCL, VSNL, BHEL, SAIL, NTPC); now also Maharatna and Miniratna.
• Globalisation: integrating the Indian economy with the world economy — reducing import duties, allowing foreign direct investment, free movement of goods, services, capital and technology, joining WTO (1995).
• Effects: faster growth, more foreign investment, larger forex reserves, better consumer choice; but also concerns about agriculture, jobs, inequality and small industries.

Important terms

• LPG – Liberalisation, Privatisation, Globalisation.
• Disinvestment – selling government shares in public sector units.
• FEMA – Foreign Exchange Management Act (replaced FERA).
• FDI – Foreign Direct Investment.

Important dates and people

• 1956 – Industrial Policy reserved 17 industries for the public sector.
• 1969 – MRTP Act.
• July 1991 – New Economic Policy.
• 1997-98 – Navratna status to nine PSUs.

5 important questions

Q1. State the objectives of the New Economic Policy of 1991.

Control inflation, correct the balance of payments, raise growth, build forex reserves, integrate with the world economy, increase private participation.

Q2. Explain liberalisation and its measures.

Removing government controls — delicensing, lower import duties, freedom to expand, market-based interest rates.

Q3. Explain the measures of privatisation.

Disinvestment, dereservation, Navratna status, replacing FERA by FEMA, support to workers through national renewal fund.

Q4. What is globalisation? State its features.

Integration of the national economy with the world economy; free flow of goods, services, capital and technology; reduction of trade barriers; encouraging FDI.

Q5. Name any four Navratna companies.

IOC, ONGC, BHEL and SAIL (also HPCL, BPCL, IPCL, VSNL, NTPC).

Exam tip

Organise long answers under three headings — Liberalisation, Privatisation, Globalisation — with 3–4 measures each.

Quick summary

Economic planning means using a country's resources in a planned way to achieve set goals within a time period. This chapter explains the meaning and features of economic planning, India's Five Year Plans, the objectives of planning, and the replacement of the Planning Commission by NITI Aayog in 2015.

Key points

• Definitions given by Dr. H. D. Dickinson and Mrs. Barbara Wootton: planning is the making of major economic decisions by a central authority on the basis of a survey of the whole economy.
• Pre-independence plans: Bombay Plan, People's Plan, Gandhian Plan.
• The Planning Commission was set up in 1950, with the Prime Minister as ex-officio Chairman.
• Features of planning: central planning authority, survey of resources, objectives, priorities and targets, mobilisation of resources, fixed plan period (five years in India), evaluation (mid-term appraisal), continuous process, co-ordination with states, flexibility.
• Main objectives of India's plans: economic growth, removing poverty and unemployment, self-reliance, modernisation, social justice and reduced inequality, education and health.
• India had 12 Five Year Plans (1951–2017). The 12th Plan (2012–2017) aimed at "faster, more inclusive and sustainable growth".
• NITI Aayog (National Institution for Transforming India) replaced the Planning Commission in 2015. It works as a think-tank, promotes co-operative federalism, gives policy advice and monitors programmes, with the Prime Minister as Chairperson.
• Achievements: growth of agriculture (Green Revolution), industry, infrastructure, education and health. Shortcomings: unemployment, poverty and inequality remained, regional imbalance, slow implementation.

Important terms

• Economic planning – deliberate use of resources by a central authority for set goals.
• Plan period – time fixed for a plan (5 years in India).
• Think-tank – body that gives ideas and policy advice.
• Co-operative federalism – centre and states working together.

Important dates and people

• 1950 – Planning Commission set up.
• 1951–1956 – First Five Year Plan.
• 2012–2017 – Twelfth (last) Five Year Plan.
• 2015 – NITI Aayog replaces Planning Commission.

5 important questions

Q1. Define economic planning and state its features (any four).

Planning means taking major economic decisions by a central authority after surveying the economy. Features: central authority, objectives and targets, fixed period, evaluation.

Q2. State the objectives of economic planning in India.

Economic growth, removal of poverty, employment generation, self-reliance, modernisation and social justice.

Q3. Write a note on NITI Aayog.

Set up in 2015 to replace the Planning Commission; works as a policy think-tank, promotes co-operative federalism and monitors programmes; chaired by the Prime Minister.

Q4. Name the plans made before independence.

Bombay Plan, People's Plan and Gandhian Plan.

Q5. State the main objective of the 12th Five Year Plan.

Faster, sustainable and more inclusive growth (2012–2017).

Exam tip

Remember: Planning Commission 1950 → NITI Aayog 2015; and India had 12 Five Year Plans.