3. Unit-2

Chapter 4
Inclusive Growth
Inclusive growth is a type of economic growth that benefits all members of society, regardless of
their social or economic status. This means that the growth is not limited to a select group of people,
but rather it is widely distributed across different segments of the population.
Inclusive growth is characterized by a reduction in poverty, a decrease in inequality, and an
improvement in the overall well-being of individuals.
Inclusive growth can be achieved through policies and programs that promote equal access to
education, healthcare, employment, and other basic services. This includes providing opportunities for
marginalized groups such as women, people with disabilities, and minorities to participate in the growth
process.
Importance of inclusive growth in India

In India, inclusive growth is particularly important for several reasons. First, India is a country with a
large and diverse population, with many people living in poverty and facing significant socio-economic
challenges. For this reason, it is important to ensure that economic growth benefits all sections of
society, especially those who are marginalized and vulnerable.
Second, inclusive growth is essential for reducing inequality and promoting social justice. In India,
inequality is a major problem, with vast disparities in income, wealth, and access to basic services such
as education, healthcare, and sanitation. Inclusive growth can help to address these inequalities by
providing opportunities for all sections of society to participate in the growth process and share in its
benefits.
Third, inclusive growth is critical for sustainable development. India faces several environmental
challenges, including air and water pollution, deforestation, and climate change. Inclusive growth can
help to promote sustainable development by encouraging the adoption of sustainable practices and
technologies, and by ensuring that the benefits of economic growth are not achieved at the expense of
the environment.
For example, if a country's economic growth is driven by the expansion of a polluting industry, such
as coal mining, then the benefits of that growth may be concentrated in the hands of a few wealthy
individuals or companies, while the costs of pollution and environmental degradation are borne by the
local communities and the environment. In contrast, if economic growth is achieved through the
adoption of clean technologies and sustainable practices, then the benefits can be shared more widely,
and the costs of environmental degradation can be minimized.
In summary, inclusive growth is essential for promoting social justice, reducing inequality, and
achieving sustainable development in India.
42 Inclusive Growth | @Ketanomy

Salient features of inclusive growth
1. Reduction of Poverty: One of the key features of inclusive growth is the reduction of poverty. This
means that policies and strategies are designed to lift people out of poverty and provide them with the
necessary resources to improve their standard of living. For example, the government may implement
poverty alleviation schemes such as providing access to education, healthcare, and social safety nets.
2. Employment Generation: Inclusive growth also focuses on creating job opportunities for people,
particularly in sectors that are labor-intensive. By creating jobs, people are able to participate in the
growth process and improve their economic status. For example, the government may promote the
development of small and medium-sized enterprises (SMEs), which are known to generate employment.
3. Reduction of Inequality: Inclusive growth aims to reduce inequality by providing equal
opportunities to all individuals. This means that policies are designed to bridge the gap between the rich
and the poor, and to ensure that everyone has access to basic services and resources. For example, the
government may implement affirmative action policies that provide reserved seats in educational
institutions and government jobs for marginalized communities.
4. Sustainable Development: Inclusive growth also prioritizes sustainable development, which
means that economic growth is pursued in a way that does not harm the environment or deplete
natural resources. For example, the government may promote renewable energy and sustainable
agriculture practices.
5. Human Development: Inclusive growth also focuses on human development, which means that
policies and strategies are designed to improve the quality of life of people, not just their income. This
includes access to education, healthcare, and other basic services that contribute to overall well-being.
Analysis of India’s progress towards achieving inclusive growth

India has been making progress towards achieving inclusive growth in recent years, but there is still
much work to be done. Inclusive growth can be measured through various indicators such as the
Multidimensional Poverty Index (MPI), Human Development Index (HDI), and Gender Inequality Index
(GII).
The Multidimensional Poverty Index (MPI) is a measure of poverty that takes into account multiple
dimensions of deprivation, such as health, education, and standard of living. According to the Global
Multidimensional Poverty Index 2021, India's MPI has declined from 54.7% in 2019 to 49.9% in 2021,
indicating a reduction in the number of people living in multidimensional poverty. This means that India
has made progress in improving access to basic services such as healthcare, education, and sanitation,
which are essential for inclusive growth.
The Human Development Index (HDI) is a composite measure of three key dimensions of human
development: health, education, and standard of living. According to the Human Development Report
2020, India's HDI value has increased from 0.580 in 2000 to 0.645 in 2019, indicating an improvement in
human development outcomes. However, India still ranks 131 out of 189 countries, highlighting the
need for further progress towards achieving inclusive growth.
The Gender Inequality Index (GII) is a measure of gender-based inequalities in three dimensions:
reproductive health, empowerment, and economic activity. According to the Gender Inequality Index
2020, India's GII value has declined from 0.707 in 2015 to 0.501 in 2020, indicating progress in reducing
gender-based inequalities. However, India still ranks 140 out of 162 countries, indicating the need for
further efforts towards achieving gender equality and inclusive growth.

Other indicators such as the poverty rate, literacy rate, and access to basic services also reflect
India's progress towards achieving inclusive growth. However, despite these positive developments,
India still faces several challenges in achieving inclusive growth, such as regional disparities, gender-
based inequalities, and lack of access to basic services in certain areas. Therefore, there is a need for
continued efforts towards promoting inclusive growth through policies and programs that address these
challenges and promote equitable development.
Challenges in achieving inclusive growth in India

India is a country with a large population and a diverse range of social and economic challenges.
Achieving inclusive growth is a major challenge in India. Here are some of the challenges that hinder the
achievement of inclusive growth in India:
1. Income Inequality: Income inequality is a major challenge in India, as there is a significant
disparity in income levels between different sections of society. The top 10% of India's population owns
more than half of the country's wealth, while the bottom 50% owns only 2% of the wealth. This makes it
difficult to ensure that the benefits of economic growth are shared equitably among all sections of
society.
2. Regional Disparities: There are significant regional disparities in India, with some regions being
more developed than others. For example, states like Maharashtra and Gujarat are more developed
than states like Bihar and Uttar Pradesh. This makes it difficult to ensure that the benefits of economic
growth are shared equitably across all regions.South India
3. Unemployment: Unemployment is a major challenge in India, with a large percentage of the
population being either unemployed or underemployed. This makes it difficult to ensure that the
benefits of economic growth are shared equitably among all sections of society.
4. Lack of Access to Education and Healthcare: Access to education and healthcare is limited for
many people in India, particularly those living in rural areas. This limits their ability to participate in the
workforce and to benefit from economic growth.
5. Social Discrimination: Discrimination based on caste, religion, and gender is a significant challenge
in India. This limits the ability of certain sections of society to participate in the workforce and to benefit
from economic growth.
Investment in Infrastructure for Inclusive Economic Growth

Investment in physical and digital infrastructure is a crucial factor in promoting inclusive growth.
Physical Infrastructure
Physical infrastructure refers to the basic facilities and structures that are necessary for the
economy to function, such as roads, bridges, ports, airports, and power plants. Investment in physical
infrastructure can help in inclusive growth in the following ways:
1. Improved Connectivity - Investment in physical infrastructure can help to improve connectivity
across the country. This can reduce regional disparities and promote inclusive growth. For example, a
good road network can enable farmers in remote areas to access markets, leading to better prices for
their produce and a reduction in poverty.

2. Increased Productivity - Investment in physical infrastructure can lead to increased productivity.
For example, better transportation facilities can reduce transportation costs and time, making it easier
for businesses to move goods and people. This can lead to increased economic activity and job creation.
3. Increased Access to Basic Services - Investment in physical infrastructure can help to increase
access to basic services such as education, healthcare, and sanitation. For example, the construction of
schools and hospitals can help to improve the quality of education and healthcare in rural areas,
reducing the gap between urban and rural areas.
Digital Infrastructure
Digital infrastructure refers to the technology and networks that enable the exchange of
information, such as the internet, mobile networks, and computer systems. Investment in digital
infrastructure can help in inclusive growth in the following ways:
1. Improved Access to Information - Investment in digital infrastructure can help to improve access
to information, which is essential for economic growth. For example, farmers can use mobile apps to
access information on crop prices, weather forecasts, and agricultural practices, leading to better
decision-making and increased productivity.
2. Increased Economic Participation - Investment in digital infrastructure can help to increase
economic participation, especially for marginalized communities. For example, e-commerce platforms
can help small businesses to sell their products online, reaching a wider customer base and increasing
their revenue.
3. Improved Service Delivery - Investment in digital infrastructure can help to improve service
delivery, especially in areas such as healthcare and education. For example, telemedicine and online
education platforms can help to provide healthcare and education services to people in remote areas,
reducing the gap between urban and rural areas.
Intra-generational and Inter-generational Equity in Inclusive Growth

Intra-generational equity refers to fairness and justice within a single generation, which means
that all members of a particular generation should have equal access to resources, opportunities, and
benefits. For example, in India, there are many regions where people don't have access to basic
necessities like clean drinking water, education, and healthcare. Intra-generational equity demands that
every individual within a generation should have equal access to these resources, regardless of their
caste, religion, gender, or socio-economic status.
On the other hand, inter-generational equity refers to fairness and justice between different
generations. It means that the current generation should not use up all the resources and leave nothing
for future generations. For instance, if we over-exploit natural resources such as forests, water, and
minerals, then the future generations will be deprived of these resources, and it will create an
inequitable situation. Inter-generational equity demands that we use natural resources in a sustainable
manner so that future generations can also enjoy the same resources and opportunities as we do.
Inclusive growth is a concept that seeks to address both intra-generational and inter-generational
equity. By promoting inclusive growth, we aim to ensure that everyone within a generation has equal
access to resources and opportunities, and that the benefits of economic growth are distributed fairly.
Moreover, inclusive growth seeks to ensure that economic growth is sustainable, so that future
generations can also enjoy the same benefits.

The relationship between inclusiveness and sustainability
Inclusive growth strategies aim to create opportunities and reduce inequality, which can lead to
more sustainable economic development over the long term.
Inclusive growth can contribute to sustainability by promoting social and economic stability, which is
important for long-term growth. Conversely, unsustainable practices can undermine inclusiveness by
depleting resources and exacerbating inequality.
Strategies for Achieving Inclusiveness and Sustainability

Inclusive growth and sustainability can be achieved through policies and practices that promote
access to education, healthcare, and other essential services, as well as opportunities for economic
participation and growth. Sustainable practices can also enhance inclusiveness by creating jobs and
economic opportunities that benefit marginalized communities and reduce poverty. Examples of
inclusive and sustainable policies include investments in renewable energy, public transportation, and
affordable housing.
Measures for addressing the challenges of inclusive growth

1. Policies that promote equality: Governments can develop policies that promote equality, such as
progressive taxation, minimum wage laws, and affirmative action programs. These policies can help to
reduce income and wealth inequality and ensure that everyone has access to basic services and
opportunities.
2. Investment in human capital: Governments and other stakeholders can invest in human capital
through education and training programs, particularly for disadvantaged groups. This can help to reduce
the skills gap and ensure that everyone has access to quality education and training.
3. Access to finance: Access to finance is crucial for economic growth and development.
Governments and other stakeholders can promote financial inclusion by providing access to affordable
credit and other financial services, particularly for small and medium-sized enterprises (SMEs) and
marginalized groups.
4. Support for SMEs: SMEs are the backbone of many economies and can play a significant role in
promoting inclusive growth. Governments can provide support to SMEs through policies that promote
entrepreneurship, such as tax incentives and access to finance.
5. Infrastructure development: Infrastructure development is critical for economic growth and can
help to create jobs and improve access to basic services. Governments can invest in infrastructure
projects that benefit all members of society, particularly those who are marginalized or disadvantaged.
6. Social protection: Social protection measures, such as social security, unemployment insurance,
and health care, can help to reduce poverty and ensure that everyone has access to basic services.
Governments can develop social protection programs that are targeted at marginalized groups and
those living in poverty.
7. Stakeholder engagement: Inclusive growth requires the involvement of all stakeholders, including
the private sector, civil society, and marginalized groups. Governments can promote stakeholder
engagement through inclusive decision-making processes and partnerships between different sectors.

Inclusive Growth in a Market Economy
Inclusive growth in a market economy requires a balance between economic growth and social
inclusion. Market economies rely on market mechanisms, such as competition and prices, to allocate
resources and create wealth. However, without appropriate policies and interventions, market
economies can exacerbate inequality and exclude certain groups from economic opportunities. Here are
some ways to promote inclusive growth in a market economy:
1. Pro-poor policies: Governments can develop policies that are targeted at reducing poverty and
inequality, such as progressive taxation, social protection programs, and subsidies for basic services.
These policies can help to ensure that everyone has access to basic needs and opportunities, regardless
of their income level.
2. Access to finance: Access to finance is crucial for economic growth and development.
Governments can promote financial inclusion by providing access to affordable credit and other financial
services, particularly for small and medium-sized enterprises (SMEs) and marginalized groups.
3. Investment in human capital: Governments and other stakeholders can invest in human capital
through education and training programs, particularly for disadvantaged groups. This can help to reduce
the skills gap and ensure that everyone has access to quality education and training.
4. Support for SMEs: SMEs are the backbone of many economies and can play a significant role in
promoting inclusive growth. Governments can provide support to SMEs through policies that promote
entrepreneurship, such as tax incentives and access to finance.
5. Infrastructure development: Infrastructure development is critical for economic growth and can
help to create jobs and improve access to basic services. Governments can invest in infrastructure
projects that benefit all members of society, particularly those who are marginalized or disadvantaged.
6. Competition policy: Competition policy is essential for promoting market efficiency and ensuring
that prices reflect market conditions. However, governments need to ensure that competition policy
does not create market concentration and exclude smaller players from the market.
7. Stakeholder engagement: Inclusive growth requires the involvement of all stakeholders, including
the private sector, civil society, and marginalized groups. Governments can promote stakeholder
engagement through inclusive decision-making processes and partnerships between different sectors.
By balancing market mechanisms with appropriate policies and interventions, governments can
create an enabling environment that promotes inclusive growth and sustainable development for all.

Previous Years Mains Questions
1. Is inclusive growth possible under market economy? State the significance 2022
of financial inclusion in achieving economic growth in India.
2. “Investment in infrastructure is essential for more rapid and inclusive 2021
economic growth.” Discuss in the light of India’s experience.
3. Explain intra-generational and inter-generational issues of equity from the 2020
perspective of inclusive growth and sustainable development.
4. It is argued that the strategy of inclusive growth is intended to meet the 2019
objectives of inclusiveness and sustainability together. Comment on this
statement.
5. “Access to affordable, reliable, sustainable and modern energy is the sine 2018
qua non to achieve Sustainable Development Goals (SDGs)”.Comment on
the progress made in India in this regard.
6. What are the salient features of ‘inclusive growth’? Has India been 2017
experiencing such a growth process? Analyze and suggest measures for
inclusive growth.
7. Comment on the challenges for inclusive growth which include careless 2016
and useless manpower in the Indian context. Suggest measures to be
taken for facing these challenges.
8. Capitalism has guided the world economy to unprecedented prosperity. 2014
However, it often encourages shortsightedness and contributes to the
wide disparities between the rich and the poor. In this light, would it be
correct to believe and adopt capitalism driving inclusive growth in India?
Discuss.
9. With consideration towards the strategy of inclusive growth, the new 2013
Companies Bill,2013 has indirectly made CSR a mandatory obligation.
Discuss the challenges expected in its implementation in the right earnest.
Also, discuss other provisions in the Bill and their implications.

5. Inequality & Poverty
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Contents
Inequality .............................................................................................................................................. 51
Types of Inequality ........................................................................................................................... 51
Methods and indicators used to measure inequality ...................................................................... 51
Quintile Ratio ................................................................................................................................ 51
Palma Ratio................................................................................................................................... 51
Lorenz Curve and Gini Coefficient ................................................................................................ 52
Gini coefficient ............................................................................................................................. 53
Reasons for inequality in India ......................................................................................................... 53
How to combat inequality ................................................................................................................ 53
Poverty ................................................................................................................................................. 54
Types of Poverty ............................................................................................................................... 54
Committees on Poverty .................................................................................................................... 55
Previous Years Prelims Questions ........................................................................................................ 56
50 Inequality and Poverty | @Ketanomy

Chapter 5
Inequality and Poverty
Despite being one of the fastest growing economies in the world, India continues to grapple with
high levels of income inequality and widespread poverty. This has significant implications for the
country's development, as well as the well-being of its citizens.
Inequality
Inequality refers to the unequal distribution of resources or opportunities among individuals or
groups within a society.
Types of Inequality
Inequality can be broadly classified into social inequality and economic inequality.
Social inequality: Social inequality refers to differences in social status, power, and prestige among
individuals or groups. It can include differences in things like education, occupation, income, race,
gender, caste and religion. For example, in India, the caste system historically led to social inequality
where people were discriminated against based on their caste, resulting in a lack of access to resources
and opportunities.
Economic inequality: Economic inequality refers to differences in income, wealth, and economic
opportunities among individuals or groups. It can include differences in things like wages, salaries,
property ownership, and access to credit. For example, in India, there is a significant gap between the
rich and the poor, with the top 1% owning a significant amount of the country's wealth.
India's wealth inequality is at a six-decade high with the top 1% owning 40.1% of wealth
Methods and indicators used to measure inequality
Quintile Ratio
Quintile ratio is a measure of inequality that compares the income or wealth of the top 20% of a
population with the income or wealth of the bottom 20%. It is a commonly used measure of inequality
because it is easy to calculate and provides a simple way to understand how income or wealth is
distributed in a society.
Quintile Ratio = Income or wealth of the top 20% / Income or wealth of the bottom 20%
Palma Ratio
The Palma ratio is an economic measure of income inequality that compares the income of the top
10% of the population with the income of the bottom 40%. It is named after the Chilean economist
Gabriel Palma who first proposed the measure.
Palma ratio = (income share of top 10%) / (income share of bottom 40%)

For example, suppose that in a country, the top 10% of the population earns 30% of the total
income, while the bottom 40% earns 10% of the total income. The Palma ratio for this country would be:
Palma ratio = 30% / 10% = 3
The Palma ratio is often used as a measure of income inequality in developing countries where the
middle class is relatively small and the top and bottom income groups are more pronounced. In such
countries, the Palma ratio can provide a more accurate picture of inequality than measures that focus
on the middle-income groups, such as the Gini coefficient.
Like Quintile Ratio, Palma ratio is useful because it is simple to calculate and easy to interpret.
However, it does have its limitations. For instance, the Palma ratio only considers the income of the top
and bottom groups, and ignores the distribution of income within each group. In addition, it may not
capture other dimensions of inequality, such as inequality in access to education, health care, or other
resources.
Despite these limitations, the Quintile Ratio and Palma ratio are valuable tools for policymakers and
researchers to understand the nature and extent of income inequality in a society.
Lorenz Curve and Gini Coefficient

The Lorenz curve is a graphical representation of income distribution in a population. It shows how
the total income in a society is distributed among its members, and how this distribution compares to
perfect equality.
If the income distribution in this country were perfectly equal, then the Lorenz curve would be a
straight line at a 45-degree angle. This would mean that each percentile of the population would earn an
equal share of the total income. However, in reality, income is rarely distributed equally, and the Lorenz
curve will deviate from this line.
The degree of deviation from the line of perfect equality indicates the level of income inequality in
the population. The greater the deviation, the greater the inequality.

Gini coefficient
We can measure the degree of inequality using the Gini coefficient, which is a numerical measure
that ranges from 0 to 1.
The formula for the Gini coefficient is:
G = (A / (A + B))
Where:
• G is the Gini coefficient
• A is the area between the Lorenz curve and the line of perfect equality
• B is the area under the line of perfect equality
A Gini coefficient of 0 indicates perfect equality (i.e., everyone earns the same income), while a Gini
coefficient of 1 indicates perfect inequality (i.e., one person earns all the income and everyone else
earns nothing).
The Lorenz curve is a useful tool for policymakers and researchers because it provides a visual
representation of income distribution that can help identify the groups that are most affected by income
inequality. For example, if the Lorenz curve is skewed towards the bottom of the graph, it indicates that
a large portion of the population is earning very little income. This information can be used to design
policies that target these groups and help reduce inequality.
Reasons for inequality in India

1. Historical Factors: India's colonial past and the caste system have had a significant impact on
economic inequality. The caste system, which classifies people into social groups based on their birth,
has created unequal access to education, job opportunities, and social services for lower castes, leading
to economic disparities.
2. Unequal Distribution of Resources: In India, there is a significant gap between the rich and poor in
terms of access to basic resources such as healthcare, education, and sanitation. This lack of access to
resources can lead to limited opportunities and prevent individuals from breaking out of the cycle of
poverty.
3. Labor Market Discrimination: Discrimination based on gender, religion, and caste is prevalent in
India's labor market. For instance, women tend to earn less than men, and certain castes have limited
access to high-paying jobs. This can create a significant wage gap and contribute to economic inequality.
4. Unequal Distribution of Land: In India, land ownership is concentrated in the hands of a few,
leading to unequal access to agricultural resources and limited opportunities for small farmers. This can
contribute to poverty and economic inequality.
How to combat inequality

Promote education and skill development- By investing in education and training programs,
individuals can acquire skills that can help them secure better-paying jobs, which can increase their
income and reduce the income gap.
Progressive taxation policies - It means that individuals who earn more will pay a higher percentage
of their income in taxes. The revenue generated from these taxes can be used to fund social welfare
programs such as healthcare, education, and infrastructure, which can benefit those who are less
fortunate and reduce economic inequality.

The government can provide subsidies and incentives to businesses that hire individuals from
marginalized communities, such as women, minorities, and people with disabilities. By providing equal
opportunities to these groups, the government can promote economic inclusion and reduce inequality.
Implementing effective social safety net programs can also help combat economic inequality.
Programs such as food subsidies, healthcare benefits, and housing assistance can provide a safety net
for those who are struggling financially, and help them meet their basic needs.
Poverty
Poverty is a term used to describe a situation where a person or group of people do not have
enough resources to meet their basic needs and have a standard of living that is considered acceptable
within their society.
Types of Poverty
1. Absolute poverty: Absolute poverty is when someone lacks the basic necessities of life, such as
food, shelter, and clothing. In other words, it's a situation where a person cannot meet their basic needs
for survival. For example, a family that lives on the streets without access to proper nutrition,
healthcare, and sanitation facilities is experiencing absolute poverty.
2. Relative poverty: Relative poverty is when someone has less income or resources than the
average person in their society. In other words, it's a situation where a person's standard of living is
significantly lower than the average standard of living in their community. For example, a family that
lives in a small, cramped apartment and struggles to make ends meet despite working full-time jobs may
be experiencing relative poverty.
3. Urban poverty: Urban poverty refers to poverty that is concentrated in urban areas, often
characterized by inadequate housing, poor sanitation, and limited access to basic services such as
healthcare and education. For example, people living in slums or informal settlements in cities are often
considered to be experiencing urban poverty.
4. Rural poverty: Rural poverty is poverty that is concentrated in rural areas, where people often
have limited access to basic services, including healthcare, education, and transportation. For example,
farmers who are unable to afford modern farming techniques and equipment and are forced to work on
small plots of land may be experiencing rural poverty.
5. Intergenerational poverty: Intergenerational poverty occurs when poverty is passed down from
one generation to the next. For example, a child born into a family that has been living in poverty for
generations is more likely to experience poverty than a child born into a more affluent family.
6. Situational poverty: Situational poverty is a temporary form of poverty that arises due to specific
life events such as job loss, illness, or a natural disaster. For example, a person who loses their job and is
unable to find another one immediately may experience situational poverty until they are able to secure
employment again.

Committees on Poverty
Lakdawala
Committee Tendulkar Committee Rangarajan Committee
Committee
Year 1993 2009 2015
Estimation
Rural Areas 2400 Kcal Rs 27 Rs 32
Urban
2100 Kcal Rs 33 Rs 47
Areas
Items
Food items Food + Non-food items Food + Non-food Items
considered
Mixed recall period - 30 days for all
Modified mixed recall
Uniform Recall items + 365 days for 5 categories of
period - 30 days, 365 days (5
Reference period - expenditure non-food items (durable goods,
categories), 7 days -
period on list items after clothing, footwear, institutional
frequently consumed goods
every 30 days medical expenses, educational
- milk, eggs, etc.
expenses)

Previous Years Prelims Questions
1. In a given year in India, official poverty lines are higher in some states 2019
than in others because
(a) poverty rates vary from State to State
(b) price levels vary from State to State
(c) Gross State Product varies from State to State
(d) quality of public distribution varies from State to State
Answers
1. B

Chapter 20
Unemployment
Unemployment is a term used to describe the situation where people who are willing and able to
work are unable to find jobs.
Terms related to Unemployment
Working age population

The working age population refers to the portion of a country's population capable of participating
in the labor force. This typically includes individuals between the ages of 15-59.
Labour Force
The labour force includes all individuals who are currently employed or unemployed but looking for
work.
People who are not working and not looking for work (such as retirees, students, or those who have
given up on finding a job) are not part of the labour force.
The labour force can be broken down by demographic factors: Economists often study the labour
force by breaking it down into subgroups based on demographic factors such as age, gender, education
level, and occupation. This can help us understand how different groups are faring in the job market and
identify areas where there may be barriers to employment.
Labour Force Participation Rate

The labor force participation rate is the percentage of people who are either working or actively
seeking work out of the total population of working-age individuals.
LFPR = (Labour Force / Total number of people in the working-age population) x 100%
So, for example, if there are 50 people employed and 10 people actively seeking work out of a total
working-age population of 100 people, the labor force participation rate would be:
(50 + 10) / 100 x 100% = 60%
The labor force participation rate is an important economic indicator because it provides insight into
the health of the labor market. A high labor force participation rate can indicate a strong labor market,
with many opportunities for employment. On the other hand, a low labor force participation rate can
indicate a weak labor market, with fewer job opportunities.
Unemployment Rate
Unemployment rate is a measure of the percentage of the total labor force in an economy that is
currently unemployed and actively seeking employment.
423 Unemployment | @Ketanomy

Unemployment Rate = (Number of Unemployed / Labor Force) x 100
Let's break down this formula with the previous example. If there are 50 people employed and 10
people actively seeking work out of a total working-age population of 100 people, the unemployment
rate would be:
Labor force = Number of employed + Number of unemployed = 60
Now we can plug in the numbers and calculate the unemployment rate:
Unemployment rate = (10 / 60) x 100% = 16.67%
Types of Unemployment
Disguised Unemployment
Disguised unemployment is a type of unemployment that occurs when people appear to be
employed but are actually not contributing to the economy in a meaningful way. In other words, there
are more people working in a particular sector than is actually necessary for the amount of work that
needs to be done.
Here's an example to help illustrate this concept. Let's say that there is a small farm that requires 4
people to work it efficiently. However, due to a lack of job opportunities in the area, 8 people are
working on the farm. While the extra 4 people may appear to be employed, they are not actually
contributing to the productivity of the farm, since the work could be done with fewer people.
Disguised unemployment is often found in agricultural economies, where there may be a lack of
alternative employment opportunities. It can also occur in other sectors of the economy, such as
construction or manufacturing.
Disguised unemployment can be measured using a concept called the "Marginal Product of
Labor" (MPL). The MPL is the additional output that is produced when one additional unit of labor is
added to the production process. When the MPL is low or zero, it suggests that there may be disguised
unemployment in the sector.
MPL = change in output / change in labor input
If the MPL is low or zero, it suggests that adding additional labor to the production process is not
resulting in much additional output. This could indicate that there are too many workers in the sector,
and some of them are not actually contributing to the economy.
Structural Unemployment
Structural unemployment is a type of unemployment that occurs when there is a mismatch between
the skills and abilities of workers and the jobs that are available in the economy. In other words, it's
when people are unemployed because their skills are not in demand in the job market.
One common example of structural unemployment is when a particular industry or sector of the
economy experiences a decline and jobs in that area become less in demand. For example, the rise of
automation and technology has led to job losses in industries such as manufacturing, where machines
and robots can perform tasks that were previously done by human workers. This can result in structural
unemployment for workers who have skills and experience in those industries but may not have the
necessary skills to transition to new jobs in other sectors of the economy.

Another example of structural unemployment is when there is a lack of education and training
opportunities available for workers to acquire the skills needed for jobs that are in demand. This can be
especially true for workers in rural or economically disadvantaged areas, where there may be limited
access to education and training programs.
By helping workers to develop new skills and transition to new job opportunities, we can reduce the
incidence of structural unemployment and promote more inclusive economic growth.
Seasonal unemployment
Seasonal unemployment refers to a type of unemployment that occurs due to seasonal fluctuations
in demand for labor. This means that during certain times of the year, there is more demand for workers
in certain industries, and during other times of the year, there is less demand. As a result, workers may
be unemployed during the off-seasons when there is not enough work available.
One common example of seasonal unemployment is in the agricultural industry. During planting and
harvesting seasons, there is a lot of demand for workers to help with the planting, harvesting, and
processing of crops. However, during the off-seasons, there is not as much work available in this
industry, and workers may be unemployed.
Another example of seasonal unemployment is in the tourism industry. In many tourist destinations,
there is a peak season when there are a lot of visitors and a lot of demand for workers in the hospitality
and service sectors. However, during the off-seasons, there are fewer visitors and less demand for
workers, which can lead to unemployment.
In some cases, seasonal unemployment can also lead to a reduction in wages for workers, as there is
more competition for the available jobs during peak seasons.
Governments may try to address seasonal unemployment through policies such as job training
programs or by supporting industries that can provide year-round employment. In some cases,
governments may also provide unemployment benefits or other forms of support to workers who are
unemployed during the off-seasons.
Technological Unemployment
Technological unemployment is a term that refers to the loss of jobs that occurs as a result of
advancements in technology. When machines and automation become more efficient and capable than
human workers, it can lead to a decrease in demand for human labor and result in unemployment.
One example of technological unemployment is the replacement of human workers with robots in
factories.
Another example of technological unemployment is the rise of self-driving cars. While this
technology is still being developed, it has the potential to greatly reduce the need for human drivers in
industries such as transportation and logistics. If self-driving cars become widespread, it could lead to
significant job losses for drivers and other workers in related industries.
It's worth noting that technological unemployment is not a new phenomenon. Throughout history,
technological advancements have often led to job losses in certain industries, but they have also created
new job opportunities in others. For example, the rise of the internet and e-commerce has led to the
creation of new jobs in fields such as web development and online marketing.
However, some economists and researchers have expressed concern that the current wave of
automation and artificial intelligence could lead to a greater and more widespread impact on
employment than in the past. As technology continues to advance, it's important for policymakers and

society as a whole to consider the potential impacts on employment and work to develop solutions to
help workers adapt to these changes.
Cyclical Unemployment
Cyclical unemployment is a type of unemployment that occurs as a result of changes in the overall
economy. Specifically, cyclical unemployment is caused by a downturn in the business cycle, which leads
to a decrease in demand for goods and services, and therefore a decrease in demand for workers.
When the economy is in a downturn or recession, companies may cut back on production and lay off
workers in order to save costs. As a result, many workers who were previously employed may find
themselves without a job.
For example, during the global financial crisis of 2008, many companies in the United States and
around the world were forced to lay off workers in order to stay afloat. This led to a significant increase
in the number of people who were unemployed.
Cyclical unemployment is usually temporary and tends to decrease as the economy recovers and
demand for goods and services increases. However, it can have significant negative effects on
individuals and the overall economy in the short term, as people may struggle to pay bills or may be
unable to find work.
Policymakers may use fiscal or monetary policy to try to combat cyclical unemployment during times
of economic downturn. For example, the government may increase spending on infrastructure projects
to create jobs, or the central bank may lower interest rates to stimulate borrowing and spending.
Frictional Unemployment
Frictional unemployment is a type of unemployment that occurs when workers are between jobs. It
happens when people are in the process of looking for a new job or transitioning from one job to
another.
It's called "frictional" unemployment because it's a natural part of the labor market, and it occurs
because of the time and effort it takes for workers and employers to find each other and match the right
skills to the right job openings. In other words, there is some "friction" or delay in the process of job
matching.
For example, let's say that someone quits their job as a software developer to look for a job as a
data analyst. During the time they're searching for a new job, they would be considered frictionally
unemployed. They're not unemployed because they lack the skills or qualifications to work, but because
they're in between jobs.
Another example of frictional unemployment could be someone who just graduated from college
and is actively searching for their first job. They may face a period of unemployment while they search
for a job that matches their skills and qualifications.
It's important to note that frictional unemployment is generally considered to be a temporary and
short-term phenomenon. In fact, some level of frictional unemployment is actually seen as a good thing
because it can help to facilitate better job matches and more efficient use of labor resources in the
economy.

Voluntary Unemployment
Voluntary unemployment refers to a situation where a person chooses not to work, even though
there are job opportunities available. This can occur for a variety of reasons, such as personal
preferences, family responsibilities, or the pursuit of further education or training.
For example, let's say that a recent college graduate is offered a job with a starting salary that is
below their expectations. The graduate may choose not to take the job and instead continue searching
for a higher paying opportunity, even though they are capable of doing the job they were offered. This is
an example of voluntary unemployment, as the individual has made a conscious decision not to work,
despite the presence of job opportunities.
Another example of voluntary unemployment could be someone who decides to take time off work
to care for a sick family member. While there may be job opportunities available, the individual has
chosen not to work in order to take care of their family member.
In some cases, voluntary unemployment can be beneficial for the individual and society. For
example, if someone chooses to pursue further education or training, it may lead to increased skills and
higher wages in the future, which can ultimately benefit the economy as a whole.
Underemployment
Underemployment refers to a situation where a person is employed but not in a job that fully
utilizes their skills, abilities, and education. In other words, they may be working, but they are not able
to work as many hours as they would like, or they are working in a job that does not pay as well or
provide the same level of job security as they could otherwise have.
An example of underemployment would be a person who holds a degree in engineering but is
working as a cashier at a retail store. They are employed, but they are not using their education and
skills to their fullest potential, and they may be earning less than they would in a job that better matches
their qualifications.
Underemployment can have a number of negative effects on both individuals and the economy as a
whole. For individuals, it can result in lower wages, fewer benefits, and reduced job satisfaction. It can
also lead to increased stress, depression, and other mental health issues.
From an economic perspective, underemployment can result in a loss of productivity and economic
growth. When people are not able to work to their full potential, it can slow down the overall growth of
the economy and make it harder for businesses to expand and create new jobs.
Keynesian Unemployment
Keynesian unemployment is a type of unemployment that is caused by a lack of aggregate demand
in the economy. To understand this, we first need to understand the basic principles of Keynesian
economics.
As per, John Maynard Keynes, well known economist, the economy is not always self-correcting and
can sometimes get stuck in a state of recession or depression. In his view, government intervention is
necessary to stimulate the economy and help it recover from these downturns.
One of the ways Keynes thought the government could intervene was by increasing aggregate
demand. Aggregate demand refers to the total amount of goods and services that consumers,
businesses, and the government are willing to buy at a given price level. When aggregate demand is low,
businesses may not have enough customers to justify hiring new workers, which can lead to
unemployment.
Keynesian unemployment occurs when the economy is in a recession or depression, and there is not
enough aggregate demand to keep people employed. In this situation, the government can step in and
use various policy tools to increase aggregate demand and stimulate economic growth.
For example, the government might increase spending on infrastructure projects or provide tax
incentives to businesses to encourage investment. By doing so, they can create more demand for goods
and services, which in turn can lead to more hiring and lower unemployment.
Another way to increase aggregate demand is by lowering interest rates, which can make borrowing
cheaper and encourage consumers and businesses to spend more. This can also help stimulate
economic activity and reduce unemployment.
Measurement of Unemployment
In India, the National Sample Survey Office (NSSO), which is part of the Ministry of Statistics and
Programme Implementation (MoSPI), is responsible for conducting surveys to measure unemployment.
There are several approaches to measuring unemployment, and the NSSO uses three main
approaches:
1. Usual Status Approach: This approach estimates only those persons as unemployed who had
no gainful work for a major time during the 365 days preceding the date of the survey. This
approach provides a measure of long-term unemployment.
2. Weekly Status Approach: This approach considers only those persons as unemployed who did
not have gainful work even for an hour on any day of the week preceding the date of the survey.
This approach provides a measure of short-term unemployment.
3. Daily Status Approach: This approach measures the unemployment status of a person for
each day in a reference week. A person who has no gainful work even for 1 hour in a day is
described as unemployed for that day. This approach provides a more detailed picture of
unemployment patterns over time.
The Periodic Labour Force Survey (PLFS) is a comprehensive survey of employment and
unemployment conducted by the National Sample Survey Office (NSSO).
The PLFS collects data on a wide range of labor market indicators, including employment,
unemployment, and labor force participation rates. It also provides detailed information on the
demographic characteristics of the labor force, such as age, sex, education, and occupation.
The survey is conducted using a stratified random sampling method, and covers both rural and
urban areas. The sample size is large enough to provide reliable estimates at the national, state, and
district levels.
The PLFS has become an important source of data for policymakers, researchers, and analysts
interested in understanding the dynamics of the labor market in India. It provides up-to-date
information on key labor market indicators, and helps to identify trends and patterns that can inform
policy decisions related to employment, training, and social protection.

Elasticity of Employment
The elasticity of employment refers to the responsiveness of employment to changes in economic
growth, as measured by the growth rate of GDP.
Elasticity of Employment = % change in employment / % change in GDP
If the elasticity of employment is greater than 1, employment is said to be elastic, which means that
employment growth is more responsive to changes in economic growth. Conversely, if the elasticity of
employment is less than 1, employment is said to be inelastic, which means that employment growth is
less responsive to changes in economic growth.
A situation where the GDP is increasing, but employment is not increasing at the same rate, is
known as jobless growth. Jobless growth occurs when the economy experiences growth without
generating enough new jobs to keep pace with the growth in the labor force. This can happen due to a
variety of factors, such as technological advancements that replace human labor, changes in the
structure of the economy, or policy issues that discourage job creation.
Causes of Unemployment in India

Unemployment is a major issue in India, and there are a number of different factors that contribute
to it. Here are some of the main causes of unemployment in India:
1. Lack of education and skills: Many people in India do not have the necessary education or
skills to qualify for available job opportunities. This can be due to a lack of access to education,
or to an education system that does not adequately prepare students for the workforce. For
example, in rural areas of India, many young people do not have access to quality education,
which can make it difficult for them to find good jobs later on.
2. Population growth: India has a very large population, which means that there are more
people competing for a limited number of jobs. This can make it difficult for people to find
employment, especially in sectors where job growth is not keeping up with population growth.
3. Slow economic growth: When the economy is growing slowly, there are fewer new jobs
being created, which can lead to higher levels of unemployment. This can happen for a variety
of reasons, such as government policies that discourage investment or slow down economic
growth, or external factors like global economic downturns that affect the Indian economy.
4. Agriculture sector: Agriculture is a major sector in India, and it employs a large number of
people. However, the sector is often characterized by low wages and unstable employment,
which can contribute to unemployment. Additionally, many people who work in agriculture do
not have access to alternative employment opportunities, which can make it difficult for them
to transition to other sectors.
5. Demographic trends: India has a young population, with a large number of people entering
the workforce each year. While this can be a positive thing in terms of providing a large pool of
potential workers, it can also contribute to higher levels of unemployment if job growth does
not keep up with population growth.

Impact of Unemployment
1. Economic impact: Unemployment can have a negative impact on the economy as a whole.
When people are unemployed, they have less money to spend, which can lead to a decrease in
demand for goods and services. This can cause businesses to slow down or even shut down,
leading to more job losses. It can also lead to a decrease in tax revenues for the government,
which can impact public services and infrastructure.
2. Social impact: Unemployment can also have a significant social impact. People who are
unemployed may experience stress and anxiety due to financial instability, which can impact
their mental and physical health. It can also lead to social issues such as poverty, homelessness,
and crime. Additionally, long-term unemployment can lead to a loss of skills and self-confidence,
making it even harder to find employment in the future.
3. Political impact: High levels of unemployment can have political ramifications as well. In some
cases, it can lead to social unrest and political instability. Politicians may be pressured to take
action to address the issue, such as creating new jobs or implementing policies to support those
who are unemployed.
Government Initiatives to control unemployment

1. Fiscal policy: This refers to the government's use of taxes and spending to influence the
economy. One way to control unemployment through fiscal policy is through government
spending on public projects and infrastructure, which can create jobs and stimulate economic
growth. For example, the Indian government has launched various infrastructure projects, such
as building highways, ports, and airports, to create jobs and promote economic development.
2. Monetary policy: This refers to the central bank's control over the supply of money and credit
in the economy. One way to control unemployment through monetary policy is through interest
rate adjustments, which can influence borrowing and spending. For example, if the central bank
lowers interest rates, it can encourage businesses to invest more, which can create jobs and
reduce unemployment.
3. Training and education programs: Governments can also invest in training and education
programs to help workers develop the skills they need to find and keep jobs. For example, the
Indian government has launched various initiatives to provide vocational training and skill
development programs to unemployed youth, such as the Pradhan Mantri Kaushal Vikas Yojana.
4. Job creation programs: Governments can also directly create jobs through various programs
and initiatives. For example, the Indian government has launched the Mahatma Gandhi National
Rural Employment Guarantee Act (MNREGA), which provides employment to individuals
through public works programs.
5. Entrepreneurship promotion: Governments can also promote entrepreneurship and self-
employment as a way to create jobs and reduce unemployment. For example, the Indian
government has launched the Startup India initiative, which provides funding, mentoring, and
other support to entrepreneurs to help them start and grow their businesses.

1. Disguised unemployment generally means 2013
(a) large number of people remain unemployed
(b) alternative employment is not available
(c) marginal productivity of labour is zero
(d) productivity of workers is low

Answers
1. D

21. Human Resource Development
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Contents
Importance of HRD for Economic Growth and Development:........................................................... 435
Demographic Dividend ....................................................................................................................... 435
Key Components of Demographic Dividend: ................................................................................. 436
Utilizing the Demographic Dividend:.............................................................................................. 436
Challenges and Considerations: ..................................................................................................... 436
Informal Sector in India ...................................................................................................................... 437
Characteristics of the Informal Sector:........................................................................................... 437
Challenges and Concerns: .............................................................................................................. 437
Government Initiatives: .................................................................................................................. 437
Labor Migration in India ..................................................................................................................... 438
Types of Labor Migration: .............................................................................................................. 438
Causes of Labor Migration: ............................................................................................................ 438
Impact on Human Resource Development: ................................................................................... 438
Challenges and Concerns: .............................................................................................................. 439
Gender Disparity................................................................................................................................. 439
Education and Gender Disparity: ................................................................................................... 439
Employment and Gender Disparity: ............................................................................................... 439
Social Participation and Gender Disparity: ..................................................................................... 440
Causes of Gender Disparity: ........................................................................................................... 440
Impact of Gender Disparity: ........................................................................................................... 440
Health and Human Resource Development ....................................................................................... 440
Healthcare Challenges in India: ...................................................................................................... 441
Impact of Health on Human Resource Development: ................................................................... 441
Challenges: ..................................................................................................................................... 441
Ageing Population and Its Implications on Human Resource Development ..................................... 442
Factors Contributing to an Ageing Population: .............................................................................. 442
Challenges Posed by an Ageing Population:................................................................................... 442
Way forward: .................................................................................................................................. 442
The Knowledge Economy ................................................................................................................... 442
433 Human Resource Development | @Ketanomy
Key Features of the Knowledge Economy: ..................................................................................... 443
Challenges: ..................................................................................................................................... 443
Entrepreneurship ............................................................................................................................... 443
Key Aspects of Entrepreneurship: .................................................................................................. 443
Government Initiatives to Promote Entrepreneurship: ................................................................. 444
Various Government initiatives for Human Resource Development in India .................................... 444
Literacy missions ............................................................................................................................ 444
Higher education initiatives ........................................................................................................... 444
Skill development initiatives: ......................................................................................................... 444
Capacity building initiatives:........................................................................................................... 445
Previous Years Prelims Questions ...................................................................................................... 446
Previous Years Mains Questions ........................................................................................................ 446

Chapter 21
Human Resource Development
Human Resource Development (HRD) refers to enhancing the skills, knowledge, capabilities, and overall
potential of individuals within a society or organization.
HRD involves:
1. Education: Formal and informal learning processes that equip individuals with academic knowledge
and cognitive skills.
2. Training: Skill-specific programs that enhance practical abilities for specialized tasks.
3. Skill Development: Fostering technical, vocational, and soft skills to address industry demands.
4. Capacity Building: Developing leadership, managerial, and problem-solving competencies.
5. Lifelong Learning: Continual development throughout one's career to adapt to changing
environments.
Importance of HRD for Economic Growth and Development:
1. Enhanced Workforce Productivity: A skilled workforce can efficiently utilize resources, innovate,
and improve operational efficiency, thereby boosting economic productivity.
2. Competitive Advantage: Nations with a highly skilled workforce gain a competitive edge in the
global market. It enhances a country's ability to offer specialized services, attract foreign
investments, and engage in high-value industries.
3. Poverty Reduction and Social Inclusion: HRD creates better employment opportunities and higher
income potential, reducing poverty and improving living standards. It promotes social inclusion by
providing equal access to education and skill development, empowering marginalized groups.
4. Demographic Dividend Utilization: HRD maximizes the potential benefits of a youthful population
by equipping them with skills that match labor market demands.
5. Reduction of Unemployment and Underemployment: A better-skilled workforce is more
adaptable to changing job requirements.
6. Sectoral and Regional Development: It reduces migration from rural to urban areas by creating
opportunities at the local level.
7. Sustainable Development: It ensures that growth benefits all sections of society and contributes to
long-term stability.
Demographic Dividend
Demographic dividend refers to the economic advantage that a country can potentially gain from having
a large and youthful working-age population compared to the dependent and elderly population. It
occurs when the proportion of the population in the working-age group (typically 15 to 64 years) is
larger than the dependent population (children and elderly), leading to a potential boost in economic

growth and development. This phenomenon is a result of declining birth rates and mortality rates within
a population.
Key Components of Demographic Dividend:
1. Youthful Population: This results from lower birth rates, improved healthcare, and reduced child
mortality.
2. Labor Force Participation: A larger working-age population can help increase the overall labor
force participation rate.
3. Economic Growth Potential: More people in the workforce can lead to increased production,
innovation, and consumption.
4. Savings and Investments: A demographic dividend offers an opportunity for increased savings and
investments, as the working-age population can save a significant portion of their income.
5. Human Capital Development: Countries with a demographic dividend should invest in education,
skill development, and training to ensure that the youth entering the workforce are equipped with
the necessary skills to drive economic growth.
Utilizing the Demographic Dividend:
To harness the benefits of the demographic dividend, governments and policymakers need to
implement strategies that promote economic growth and human development. Key strategies include:
1. Quality Education: Investing in education and vocational training to ensure that the youth are
equipped with relevant skills for the job market. This enhances human capital and employability.
2. Healthcare Services: Ensuring accessible and quality healthcare services to reduce mortality rates,
leading to a healthier and more productive workforce.
3. Job Creation: Promoting policies that encourage job creation, entrepreneurship, and investment in
various sectors of the economy.
4. Women Empowerment: Promoting gender equality and women's participation in the workforce
can enhance the demographic dividend by increasing the labor force participation rate.
5. Infrastructure Development: Developing infrastructure such as transportation, communication,
and energy systems can facilitate economic activities and attract investments.
6. Social Security and Pension Schemes: Implementing social safety nets and pension schemes to
support the elderly population can mitigate potential challenges that arise as the demographic
structure changes over time.
Challenges and Considerations:
1. Dependency Ratio: While demographic dividend offers opportunities, it also comes with challenges.
If not managed properly, a sudden increase in the dependent elderly population can strain social
welfare systems.
2. Mismatched Skills: The education and training system must align with the needs of the job market
to avoid a situation where a large youth population does not find suitable employment
opportunities.
3. Urbanization: As the youth population migrates to urban areas for better opportunities, proper
urban planning and infrastructure development are essential to prevent overcrowding and
inadequate living conditions.

4. Policy Coordination: Effective coordination between various sectors such as education, health,
labor, and finance is crucial to fully utilize the demographic dividend.
In conclusion, the demographic dividend presents a unique opportunity for countries to accelerate
economic growth and development. However, realizing these benefits requires careful planning,
investment in human capital, and implementation of appropriate policies to ensure that the youth
population can contribute effectively to the economy and society as a whole.
Informal Sector in India
The informal sector, often referred to as the unorganized sector, encompasses economic activities that
are not regulated or protected by formal labor laws, lack official recognition, and operate outside of
traditional bureaucratic structures. It is a significant component of many developing economies,
including India.
Characteristics of the Informal Sector:
1. Limited Legal Recognition: Informal sector jobs are often not protected by formal contracts or
labor laws, leaving workers vulnerable to exploitation.
2. Low Skill Requirement: Many jobs in the informal sector require basic skills and minimal training.
These jobs are easily accessible to those with limited education.
3. Lack of Social Security: Workers in the informal sector typically lack access to social security
benefits such as healthcare, pension, and insurance.
4. Low Productivity and Income: Due to the lack of access to resources, technology, and markets,
informal sector workers often earn lower wages compared to their formal sector counterparts.
Challenges and Concerns:
1. Exploitation and Vulnerability: Informal sector workers often face exploitation, low wages, and
poor working conditions due to the lack of legal protection and bargaining power.
2. Lack of Social Security: Absence of social security benefits makes informal sector workers
susceptible to financial shocks and hardships.
3. Inadequate Skill Upgradation: Limited access to training and skill development programs can
hinder the growth potential of informal sector workers.
4. Limited Access to Finance: Informal enterprises often struggle to access formal financial services,
hindering their ability to expand and innovate.
5. Tax Evasion and Informal Economy: The informal sector's unregulated nature can lead to tax
evasion and reduced government revenue, affecting public welfare programs.
Government Initiatives:
1. Skill Development Programs: The government has launched skill development initiatives like the
Skill India Mission to enhance the employability of informal sector workers.
2. Social Welfare Schemes: Various welfare programs aim to provide social security and financial
assistance to informal sector workers and their families.
3. Financial Inclusion: Efforts are being made to increase financial inclusion and provide credit access
to informal sector entrepreneurs through initiatives like Jan Dhan Yojana.

4. Micro, Small, and Medium Enterprises (MSME) Support: The government supports informal
sector enterprises through schemes that provide credit, technology, and market access.
Labor Migration in India
Labor migration refers to the movement of people from one region or country to another in search of
better employment opportunities and improved living conditions. In India, labor migration is a
significant phenomenon with far-reaching implications for both the source and destination areas. It
plays a crucial role in shaping the human resource development landscape of the country.
Types of Labor Migration:
Internal Migration: Movement of people within the borders of the same country. This can be rural-to-
urban migration, inter-state migration, or movement between different regions within a state.
International Migration: Movement of people from one country to another for work. In the Indian
context, this often involves migrating to Gulf countries, Southeast Asia, Europe, and North America.
Causes of Labor Migration:
1. Employment Opportunities: Lack of sufficient employment opportunities in rural areas and small
towns compels individuals to migrate in search of better-paying jobs.
2. Wage Disparities: Wage differentials between rural and urban areas or between countries motivate
people to migrate for higher incomes.
3. Skilled and Unskilled Labor Demand: Both skilled and unskilled labor is in demand, particularly in
sectors such as construction, agriculture, manufacturing, and services.
4. Poverty and Livelihood: Migrants often come from economically disadvantaged backgrounds,
seeking to escape poverty and improve their quality of life.
5. Education and Aspirations: Aspirations for better education, lifestyle, and social mobility drive
individuals to migrate to urban centers or other countries.
Impact on Human Resource Development:
1. Skill Transfer and Development: Labor migration contributes to skill development as migrants
acquire new skills and knowledge, often transferring them back to their home regions.
2. Remittances: Migrants send remittances back home, which can contribute to economic
development, poverty reduction, and improved access to education and healthcare.
3. Urbanization: Migration to urban areas leads to urbanization, with both positive and negative
consequences for infrastructure, services, and quality of life.
4. Labor Shortages and Surpluses: Migration can result in labor shortages in source areas and
surpluses in destination areas, affecting local labor markets.
5. Social and Cultural Changes: Migrants' exposure to different cultures and values can lead to social
changes and influence attitudes toward education, gender roles, and social norms.

Challenges and Concerns:
1. Exploitation and Vulnerability: Migrants often face exploitation, low wages, and poor working
conditions due to their vulnerable status.
2. Family Separation: Migration can lead to family separation and disruption of social ties, impacting
emotional well-being.
3. Informal Employment: Many migrants end up in informal sector jobs, which lack job security and
social protection.
4. Legal and Social Protection: Migrants may lack legal protection, making them susceptible to abuse
and human rights violations.
1. Welfare Schemes: Various government schemes aim to provide social security and healthcare
benefits to migrant workers and their families.
2. Skill Development: Skill development programs are being implemented to enhance the
employability of migrant workers and improve their access to formal sector jobs.
3. Inter-state Cooperation: Collaborative efforts between states are being promoted to ensure the
welfare of migrant workers and address challenges related to their mobility.
Gender Disparity
Gender disparity refers to the unequal treatment, opportunities, and outcomes between individuals of
different genders. Addressing gender disparity is essential for achieving sustainable and inclusive
development. In India, despite significant progress, gender disparities persist and continue to hinder
optimal human resource development.
Education and Gender Disparity:
1. Enrollment Disparity: Historically, girls and women have faced lower enrollment rates in formal
education systems, particularly in rural and marginalized communities.
2. Literacy Gap: A gender-based literacy gap exists, with higher illiteracy rates among women, limiting
their access to knowledge, skills, and opportunities.
3. Educational Attainment: Even when girls enroll in schools, they often drop out early due to social,
cultural, and economic factors, leading to lower educational attainment compared to boys.
Employment and Gender Disparity:
1. Labor Force Participation: Women's participation in the formal labor force is lower than that of
men, largely due to cultural norms, societal expectations, and lack of suitable employment
opportunities.
2. Occupational Segregation: Women tend to be concentrated in lower-paying and less prestigious
occupations, leading to occupational segregation and reduced earning potential.
3. Wage Gap: A significant gender wage gap persists, where women typically earn less than men for
similar work, contributing to economic inequality.

4. Unpaid Work: Women often engage in a disproportionate amount of unpaid care work, including
household chores and caregiving responsibilities, limiting their time for paid employment and skill
development.
Social Participation and Gender Disparity:
1. Political Representation: Women's representation in political leadership positions remains low,

limiting their influence in decision-making processes.
2. Access to Resources: Limited access to land, credit, and technology further exacerbates gender
disparities in income and economic opportunities.
3. Healthcare Disparities: Gender-based healthcare disparities impact women's well-being and
productivity, particularly in terms of maternal health and nutrition.
Causes of Gender Disparity:
1. Societal Norms: Deep-seated cultural norms and stereotypes perpetuate traditional gender roles
and limit women's opportunities.
2. Discriminatory Practices: Discrimination against women in education, employment, and other
spheres reinforces gender disparity.
3. Lack of Empowerment: Limited decision-making power, social mobility, and agency restrict
women's ability to overcome gender disparities.
Impact of Gender Disparity:
1. Economic Growth: Gender disparity can hinder economic growth by underutilizing a significant
portion of the workforce and constraining human capital development.
2. Human Capital Development: Gender disparities in education and skill development limit the
overall potential of human resource development.
3. Inequality: Gender disparity contributes to income and wealth inequality, affecting social cohesion
and stability.
1. Legal Reforms: Legislative measures such as the Equal Remuneration Act and Maternity Benefit Act
aim to promote gender equality in the workplace.
2. Skill Development Programs: Initiatives like Skill India aim to provide skill training to women,
enhancing their employability and income potential.
3. Educational Programs: Programs like Beti Bachao Beti Padhao promote girls' education and
address gender stereotypes.
4. Women's Empowerment Schemes: Schemes like Mahila Shakti Kendra focus on empowering
women through skill development, entrepreneurship, and social support.
Health and Human Resource Development
A healthy population is better equipped to participate in education, employment, and other productive
activities.

Healthcare Challenges in India:
1. Limited Access: Many rural and marginalized communities have limited access to quality healthcare
services, leading to health disparities.
2. Undernutrition and Malnutrition: Malnutrition, particularly among children, remains a significant
concern, affecting physical and cognitive development.
3. Maternal and Child Health: High maternal and infant mortality rates reflect inadequate maternal
and child healthcare services.
4. Non-Communicable Diseases (NCDs): The prevalence of lifestyle-related diseases such as diabetes
and hypertension is on the rise, straining the healthcare system.
5. Infectious Diseases: Despite progress, communicable diseases like tuberculosis, malaria, and
HIV/AIDS continue to affect a substantial portion of the population.
1. National Health Mission: A flagship program aimed at improving healthcare services in rural and
urban areas, focusing on maternal and child health, immunization, and disease control.
2. Ayushman Bharat: A health insurance scheme providing financial protection to vulnerable
populations and promoting access to healthcare services.
3. Swachh Bharat Abhiyan: A sanitation campaign to improve hygiene and reduce the burden of
waterborne diseases.
4. POSHAN Abhiyan: Aims to reduce malnutrition and stunting among children and improve the
health and nutritional status of mothers.
Impact of Health on Human Resource Development:
1. Education: Good health facilitates regular school attendance, concentration, and active
participation in educational activities.
2. Labor Force Participation: Healthy individuals are more likely to participate in the labor force,
contributing to economic growth.
3. Skill Development: A healthy workforce is better equipped for skill development and lifelong
learning, enhancing employability.
4. Gender Equality: Improved health reduces gender disparities by enabling women to participate
more fully in education and employment.
Challenges:
1. Inadequate Healthcare Infrastructure: Insufficient healthcare facilities, especially in rural areas,

limit access to quality medical services.
2. Healthcare Financing: High out-of-pocket expenses for healthcare can lead to financial hardships,
particularly for low-income households.
3. Health Literacy: Lack of awareness and health literacy hinder preventive measures and timely
healthcare seeking.

Ageing Population and Its Implications on Human Resource Development
An ageing population refers to a demographic shift characterized by an increasing proportion of elderly

individuals in a society's population structure.
Factors Contributing to an Ageing Population:
• Declining Fertility Rates: Lower birth rates lead to a reduced proportion of younger individuals in
the population pyramid.
• Increased Life Expectancy: Advances in healthcare, nutrition, and living conditions have led to
longer lifespans, contributing to the ageing population trend.
Challenges Posed by an Ageing Population:
1. Dependency Ratio: The ratio of working-age individuals to dependents (children and elderly) may
become imbalanced, straining social support systems.
2. Pension Burden: Sustaining pension systems becomes challenging with a higher proportion of
retirees relative to active workers.
3. Healthcare Costs: The elderly require more healthcare services, potentially increasing healthcare
expenditure.
Way forward:
1. Skill Enhancement: As technological advancements and job requirements continue to evolve, older
individuals may face challenges in keeping up with new skills and demands. Tailored training
programs can offer them opportunities to upskill or reskill, ensuring they remain relevant in the job
market.
2. Flexible Retirement Policies: Traditional retirement often entails a sudden exit from the workforce,
which may lead to a loss of expertise and a sense of purpose for older individuals. Flexible
retirement policies offer a more gradual and phased transition into retirement, allowing seniors to
reduce their work hours or take on different roles that leverage their experience.
3. Elderly Care Services: Residential care facilities, community centers, and home-based care services
can provide older individuals with a safe and comfortable environment where their physical and
emotional needs are met. This fosters a sense of dignity and well-being among the elderly,
promoting active ageing and a higher quality of life.
4. Public Health Initiatives: Public health campaigns can raise awareness about the importance of
regular exercise, balanced nutrition, and screenings for chronic illnesses. Access to affordable
healthcare services, including geriatric care, can address age-related health challenges and improve
overall health outcomes. Additionally, community-based wellness programs and social activities can
help combat loneliness and isolation, enhancing the holistic well-being of older individuals.
The Knowledge Economy
The knowledge economy is an economic system in which the generation, distribution, and application of
knowledge and information are central to economic growth and development. In this type of economy,
knowledge becomes a critical resource, and investments in education, research, innovation, and
technology play a pivotal role in driving economic progress.

Key Features of the Knowledge Economy:
1. Intangible Assets: The knowledge economy places a higher value on intangible assets such as
intellectual property, research and development, and innovative ideas.
2. Human Capital: Human capital, referring to the knowledge, skills, and capabilities of individuals,
becomes a primary driver of economic success.
3. Innovation: Innovation and creativity are essential for producing new knowledge, products, and
services, leading to improved productivity and economic growth.
4. Information and Communication Technology (ICT): The use of advanced ICT tools and platforms
facilitates the rapid dissemination of knowledge and information.
5. Global Connectivity: The knowledge economy is characterized by global interconnectedness,
enabling the exchange of ideas and expertise across borders.
Challenges:
1. Digital Divide: Ensuring equitable access to education and technology is crucial to prevent a digital
divide between different segments of society.
2. Changing Skill Requirements: The rapid pace of technological change may render certain skills
obsolete while creating demand for new skills.
3. Intellectual Property Protection: Strong intellectual property rights are essential to incentivize
innovation and protect knowledge-based assets.
1. Education Reforms: Policies that emphasize quality education, vocational training, and digital
literacy are essential for preparing the workforce for the knowledge economy.
2. Research and Development Funding: Government investments in research and development
institutions foster innovation and knowledge creation.
3. Start-up Support: Entrepreneurship-friendly policies and support for start-ups encourage
innovation and job creation.
4. Digital Infrastructure: Expanding digital infrastructure and internet access enhances connectivity
and knowledge dissemination.
Entrepreneurship
Entrepreneurship plays a pivotal role in human resource development by fostering innovation, economic
growth, and job creation. In India, entrepreneurship has gained increasing importance as a driver of
economic development and a means to harness the potential of its human resources.
Key Aspects of Entrepreneurship:
1. Innovation: Entrepreneurship often involves innovative ideas, products, or processes that

contribute to economic advancement and societal progress.
2. Risk-Taking: Entrepreneurs are willing to take calculated risks to bring their ideas to fruition, driving
economic dynamism.
3. Resource Mobilization: Entrepreneurs secure financial, human, and technological resources to turn
their ideas into viable businesses.

4. Value Creation: Successful entrepreneurship leads to the creation of new value in terms of goods,
services, jobs, and wealth.
Government Initiatives to Promote Entrepreneurship:
1. Startup India: The initiative aims to promote and support startups through funding, tax benefits,
and mentorship.
2. MUDRA Yojana: Provides financial assistance to micro and small enterprises, promoting
entrepreneurship at the grassroots level.
3. Atal Innovation Mission: Focuses on fostering innovation and entrepreneurship among students by
establishing Atal Tinkering Labs.
4. Skill Development Initiatives: Programs like Skill India aim to equip potential entrepreneurs with
the necessary skills and knowledge.
Various Government initiatives for Human Resource Development in India
Literacy missions
1. Right to Education (RTE) Act: The Right to Education (RTE) Act, enacted in 2009, is a landmark
legislation aimed at providing free and compulsory education for children aged 6 to 14 years. It is a
fundamental right under Article 21A of the Indian Constitution and seeks to ensure equitable access
to quality education for all children.
2. Sarva Shiksha Abhiyan (SSA): Sarva Shiksha Abhiyan (SSA) is a flagship program to achieve the goal
of universal elementary education in India.
3. Digital Saksharta Abhiyan (DISHA): Digital Saksharta Abhiyan (DISHA) is a program launched to
promote digital literacy and bridge the digital divide in India.
Higher education initiatives
1. Rashtriya Uchchatar Shiksha Abhiyan (RUSA): Rashtriya Uchchatar Shiksha Abhiyan (RUSA) is a
centrally sponsored scheme to enhance the quality of higher education institutions and promote
equitable access to higher education across India.
2. Pradhan Mantri Scholarship Scheme: The Pradhan Mantri Scholarship Scheme is a government
initiative to provide financial assistance and scholarships to meritorious students pursuing higher
education.
3. Establishment of IITs/IIMs/Other premier higher education Institutes.
Skill development initiatives:
1. Skill India Mission: Launched in 2015, the Skill India Mission aims to create a skilled workforce by
providing training and enhancing employability across various sectors.
Key Features:
i. Pradhan Mantri Kaushal Vikas Yojana (PMKVY): PMKVY is a flagship scheme under the
Skill India Mission that aims to provide skill training to youth for employability.

ii. Recognition of Prior Learning (RPL): Assesses and certifies skills acquired through informal
learning or work experience. RPL validates the skills of workers who may not have formal
education, improving their employment prospects and earning potential.
iii. National Skill Development Corporation (NSDC): NSDC is a public-private partnership
organization that coordinates and supports skill development initiatives in India.
iv. Skill Development Centers: Establishes training centers across the country to provide skill
training.
2. ITIs/Polytechnics (Industrial Training Institutes/Polytechnic Institutes): ITIs and polytechnics
are vocational training institutes that offer practical skills and technical education to students.
3. Deen Dayal Upadhyaya Grameen Kaushalya Yojana (DDU-GKY): DDU-GKY focuses on rural youth,
providing skill training and wage employment opportunities.
4. National Apprenticeship Promotion Scheme (NAPS): NAPS aims to promote apprenticeship
training for skill development and job opportunities. Offers financial incentives to both apprentices
and employers to hire apprentices and provide on-the-job training.
Capacity building initiatives:
1. Mission Karmayogi: Mission Karmayogi is a capacity-building program for civil servants in India,
aimed at enhancing their effectiveness, skills, and decision-making capabilities.
2. National Policy on Education (NPE): The National Policy on Education (NPE) is a comprehensive
framework that guides the development of education in India. It was first formulated in 1968 and
revised in 1986 and 1992. The latest revision was approved by the Union Cabinet in 2020, marking
the National Education Policy (NEP) 2020.
Key Features:
i. Holistic Approach: The NEP 2020 adopts a holistic approach to education, emphasizing
multidisciplinary learning, critical thinking, and skill development.
ii. Early Childhood Care and Education (ECCE): The policy recognizes the importance of early
childhood education and aims to provide quality ECCE to children aged 3 to 6.
iii. School Education: NEP 2020 focuses on foundational literacy and numeracy, flexible
curriculum frameworks, and reducing the curriculum load.
iv. Higher Education: The policy promotes a multidisciplinary approach, autonomy for
universities, and the establishment of a National Research Foundation (NRF) for research
funding.
v. Vocational Education: NEP 2020 integrates vocational education into mainstream
education, promoting skill development and employability.
vi. Teacher Training: The policy emphasizes continuous professional development for teachers
to enhance their pedagogical skills.

1. Consider the following statements: Human capital formation as a concept is 2018
better explained in terms of a process, which enables
(1) individuals of a country to accumulate more capital.
(2) increasing the knowledge, skill levels and capacities of the people of
the country.
(3) accumulation of tangible wealth.
(4) accumulation of intangible wealth.
Which of the statements given above is/are correct?
(a) 1 and 2
(b) 2 only
(c) 2 and 4
(d) 1, 3 and 4
2. To obtain full benefits of demographic dividend, what should India do? 2013
(a) Promoting skill development
(b) Introducing more social security schemes
(c) Reducing infant mortality rate
(d) Privatization of higher education
Previous Years Mains Questions

1. The increase in life expectancy in the country has led to newer health 2022
challenges in the community. What are those challenges and what steps
need to be taken to meet them ?
2. While we found India’s demographic dividend, we ignore the dropping rates 2014
of employability. What are we missing while doing so? Where will the jobs
that India desperately needs come from? Explain.
Answers
1. C 2. A

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Chapter 4

Importance of inclusive growth in India

42 Inclusive Growth | @Ketanomy

Analysis of India’s progress towards achieving inclusive growth

43 Inclusive Growth | @Ketanomy

Challenges in achieving inclusive growth in India

Investment in Infrastructure for Inclusive Economic Growth

44 Inclusive Growth | @Ketanomy

Intra-generational and Inter-generational Equity in Inclusive Growth

45 Inclusive Growth | @Ketanomy

Strategies for Achieving Inclusiveness and Sustainability

Measures for addressing the challenges of inclusive growth

46 Inclusive Growth | @Ketanomy

47 Inclusive Growth | @Ketanomy

48 Inclusive Growth | @Ketanomy

Say hello! | @Ketanomy

50 Inequality and Poverty | @Ketanomy

51 Inequality and Poverty | @Ketanomy

Lorenz Curve and Gini Coefficient

52 Inequality and Poverty | @Ketanomy

Reasons for inequality in India

How to combat inequality

53 Inequality and Poverty | @Ketanomy

54 Inequality and Poverty | @Ketanomy

55 Inequality and Poverty | @Ketanomy

(a) poverty rates vary from State to State

(b) price levels vary from State to State

(c) Gross State Product varies from State to State

(d) quality of public distribution varies from State to State

56 Inequality and Poverty | @Ketanomy

Terms related to Unemployment

Working age population

Labour Force Participation Rate

423 Unemployment | @Ketanomy

424 Unemployment | @Ketanomy

425 Unemployment | @Ketanomy

426 Unemployment | @Ketanomy

428 Unemployment | @Ketanomy

Causes of Unemployment in India

429 Unemployment | @Ketanomy

Government Initiatives to control unemployment

430 Unemployment | @Ketanomy

(a) large number of people remain unemployed

(b) alternative employment is not available

(c) marginal productivity of labour is zero

(d) productivity of workers is low

431 Unemployment | @Ketanomy

Say hello! | @Ketanomy

434 Human Resource Development | @Ketanomy

Importance of HRD for Economic Growth and Development:

435 Human Resource Development | @Ketanomy

Key Components of Demographic Dividend:

Utilizing the Demographic Dividend:

Challenges and Considerations:

436 Human Resource Development | @Ketanomy

Informal Sector in India

Characteristics of the Informal Sector:

Challenges and Concerns:

437 Human Resource Development | @Ketanomy

Labor Migration in India