The Sixth Five-Year Plan was a great success to the Indian economy. The target growth rate was 5.2% and the actual growth rate was 5.7%. It focused primarily on the development of the primary sector, specifically agriculture and irrigation. Drafted by economist K.N. Raj, the plan was based on the Harrod–Domar model, which suggested that growth was dependent on two things. Stalin's First Five-Year Plan, adopted by the party in 1928, called for rapid industrialization of the economy, with an emphasis on heavy industry. It set goals that were unrealistic—a 250 percent increase in overall industrial development and a 330 percent expansion in heavy industry alone.

A short run competitive equilibrium is a situation in which, given the firms in the market, the price is such that that total amount the firms wish to supply is equal to the total amount the consumers wish to demand. In economics the long run is a theoretical concept in which all markets are in equilibrium, and all prices and quantities have fully adjusted and are in equilibrium. The long run contrasts with the short run, in which there are some constraints and markets are not fully in equilibrium.

Functions of a Central Bank. Main functions of a Central Bank are to act as governor of the machinery of credit in order to secure stability of prices. It regulates the volume of credit and currency, pumping in more money when market is dry of cash, and pumping out money when there is excess of credit. Broadly, a central bank has two departments, namely, issue department and banking department. We discuss below its main functions.

1.    Issue of Currency. The central bank is given the sole monopoly of issuing currency in order to secure control over volume of currency and credit. These notes circulate throughout the country as legal tender money. Note-issuing is governed by Minimum Reserve System i.e. while issuing currency notes, a minimum fixed amount of gold and foreign currency is kept by Central Bank. It has to keep a reserve in the form of gold and foreign securities as per statutory rules against the notes issued by it. It may be noted that RBI issues all currency notes in India except one rupee note. Again it is under directions of RBI that one rupee notes and small coins are issued by government mints. Remember, central government of a country is usually authorised to borrow money from the central bank. When central government expenditure exceeds government revenue and Govt, is unable to reduce its expenditure, then it borrows from RBI. This is done by selling security bills to RBI which creates new currency notes for the purpose. This is called monetisation of budget deficit or deficit financing. The government spends new currency and puts it into circulation to meet its expenditure.

2.    Banker to the Government. Central Bank functions as a banker to the government— both central and state governments. It carries out all banking business of the government. Governments keep their cash balances in the current account with the central bank. Similarly, central bank accepts receipts and makes payment on behalf of the governments. Also central bank carries out exchange, remittance and other banking operations on behalf of the government. Central bank gives loans and advances to governments for temporary periods, as and when necessary, and it also manages the public debt of the country.

3.    Bankers’ Bank and Supervisor. There are usually hundreds of banks in a country. There should be some agency to regulate and supervise their proper functioning. This duty is discharged by the central bank. Central bank acts as banker's bank in three capacities : (i) it is custodian of their cash reserves. Banks of the country are required to keep a certain percentage of their deposits with the central bank; and in this way the central bank is the ultimate holder of the cash reserves of commercial banks. (ii) Central bank is lender of last resort. Whenever banks are short of funds, they can take loans from the central bank and get their trade bills discounted. Thus Central Bank is a source of great strength to the banking system. (iii) It acts as a bank of central clearance, settlements and transfers. Its moral persuasion is usually very effective so far as commercial banks are concerned.

M1 is the money supply that is composed of physical currency and coin, demand deposits, travelers' checks, other checkable deposits, and negotiable order of withdrawal (NOW) accounts. ... However, "near money" and "near, near money," which fall under M2 and M3, cannot be converted to currency as quickly. M1 money supply includes those monies that are very liquid such as cash, checkable (demand) deposits, and traveler's checks M2 money supply is less liquid in nature and includes M1 plus savings and time deposits, certificates of deposits, and money market funds.

National domestic income at factor cost = Private final consumption expenditure + Government final consumption expenditure − Net imports + (Gross domestic fixed capital formation + Closing stock − Opening stock) − Depreciation − Net indirect taxes

Net national disposable income = = NDP_FC − Net factor income to abroad + Net indirect taxes + Net current transfers from abroad

Example

National domestic income at factor cost = Private final consumption expenditure + Government final consumption expenditure − Net imports + (Gross domestic fixed capital formation + Closing stock − Opening stock) − Depreciation − Net indirect taxes

National income (NDP_FC) = = 300 + 100 − (−10) + (50 +25 − 25) − 20 − 80 = Rs 360 arab

Net national disposable income = = NDP_FC − Net factor income to abroad + Net indirect taxes + Net current transfers from ROW

Net national disposable income = 360 − 10 + 80 + (−5) = Rs 425 arab

Poverty refers to a state in which an individual is unable to fulfill even the basic necessities of life. Poverty in India has been studied from two points: urban and rural.

• In urban areas, poor people include push cart vendors, street cobblers, rag pickers, beggars etc… #they possess few assets.

# They reside in kutcha hutments with walls made of baked mud and roofs made of grass, thatch, bamboo and wood.

# The poorest of them do not even have such dwellings.

# The urban poor are largely the overflow of the rural poor who had migrated to urban was in search of alternative employment and livelihood.

• In Rural Areas, poor people include landless agriculture laborers, cultivators with very small landholdings, landless engaged in a variety of non-agriculture jobs or tenant cultivators with small land holding.

# many of the rural people are landless. Even waste land.

# Many rural people do not get to have even two meals a clay.

On July 7, HRD Minister Ramesh Pokhriyal announced a major CBSE syllabus reduction with 30% of the syllabus slashed for the year 2020-21 for classes 9 to 12 because of the reduction in classroom teaching time due to the Covid-19 pandemic and lockdown.

CBSE has rationalized the syllabus with the help of suggestions from NCERT and the same has been notified by a new CBSE notification as well.

Deleted syllabus of CBSE Class 12 Economics

The basic aim of liberalization was to put an end to those restrictions which became hindrances in the development and growth of the nation. The loosening of government control in a country and when private sector companies’ start working without or with fewer restrictions and government allow private players to expand for the growth of the country depicts liberalization in a country.

Net current transfers from abroad is equal to the unrequited transfers of income from nonresidents to residents minus the unrequited transfers from residents to nonresidents. Data are in current U.S. dollars. Source: World Bank national accounts data, and OECD National Accounts data files. National disposable income = National income + Net indirect taxes + Net current transfers from rest of the world simply put. ... National Disposable Income for a country is in the same way as Personal Disposable Income (Personal Income – Personal taxes) is for an individual.

Laderchi et al. (2003) underscored four main approaches to poverty definition and measurement: monetary poverty, capability poverty, social exclusion poverty, and participatory poverty approaches. This article focuses on the first three approaches. These are: adequate nutritional food, water and protective housing, a non-hazardous physical and work environment, appropriate healthcare, security in childhood, significant primary relationships, physical and economic security, safe birth control and child bearing, and basic education.

Combined factor income, which can't be separated into various factor income components is known as ____________.

(Fill up the blanks with correct answer).

SOLUTION:

Combined factor income, which can't be separated into various factor income components is known as Mixed-Income of Self Employed.

i. Low Economic Development 

Throughout the British rule, Indian economy experienced very low level of economic development. As per some researches, Indian economy grew at even less than two percent during 1900-50. The reason for such a low level of development was that the British government was more concerned with the promotion of economic interests of their home country. Consequently, the colonial rule transformed India’s agriculture sector to a mere supplier of raw materials for the British industries. This not only affected the production of the agricultural sector but also ruined the small manufacturing units like handicrafts and cotton industries. These manufacturing units faced a stiff competition from the British machine made textiles and handlooms.

ii. Backwardness of Indian Agriculture

Under the colonial rule, India was basically an agrarian economy employing nearly 85% of its population. Nevertheless, the growth of the agriculture sector was meager. This was due to the prevalence of various systems of Land Settlement, particularly Zamindari system. Under this system, the zamindars (owners of land) were required to pay very high revenue (lagaan) to the British government, which they used to collect from the peasants (landless labourers, who were actually cultivating). The zamindars were mainly concerned with extracting high revenues from the peasants but never took any steps to improve the productivity of the land. Moreover, in order to feed British industries with cheap raw materials, the Indian peasants were forced to grow cash crops (such as, indigo, cotton, etc.) instead of food crops (such as, rice and wheat). This commercialisation of agriculture not only increased the burden of high revenues on the poor peasants but also led India to face shortage of food grains. Therefore, Indian agriculture remained backward and primitive.

1. Methods of Calculating National Income

(i) Income method
(ii) Expenditure method
(iii) Product method or value added method or output method

2. Income Method By this method, the total sum of the factor payments received during a given period is estimated to obtain the value of Domestic Income. Depending on the way, the income is earned.
It can be classified into following components:
(i) Compensation of employees
(ii) Operating surplus (rent, profit and interest)
(iii) Mixed income of self-employed

3. Computation of National Income (By Income Method)

4. Expenditure Method By this method, the total sum of expenditures on the purchase of final goods and services produced during an accounting year within an economy is estimated to obtain the value of domestic income.

5. Final Expenditure It is the expenditure on the purchase of final goods and services during an accounting year. It is broadly classified into four categories:
(i) Private final consumption expenditure.
(ii) Government final consumption expenditure.
(iii) Investment expenditure or gross domestic capital formation.
(iv) Net exports, i.e. difference between exports and imports during an accounting year.

7. Computation of National Income (By Expenditure Method)

.

6. Value Added Method/Product Method/Output Method By this method, the total value of all the final goods and services produced in an economy during a given time period are estimated to obtain the value of domestic income.

10. Computation of National Income (By Value Added Method)

Circular Flow of Income in a Two-sector Economy.

Let us start with a simplified model involving two sectors, namely, household sector and firm sector, assuming that there is no Govt. We further assume that the economy is a closed one having no exports or imports. Similarly there is no saving by the households, who spend all what they earn; and no investment by the firms. Such an economy has two types of markets — Product market and Factor market. Under these presumptions the firm sector hires factor services from households, who are owners of factors of production (land, labour, capital and enterprise), for producing goods and services and pays them remuneration (or compensation) in the form of money for rendering the productive services. For the factors of production, these are factor incomes known as rent, wages, interest and profit which have been generated in the production process. Thus money income flows from firm sector to the households. With this money the households purchase from the firms, manufactured goods and services to satisfy their wants with the result, the same money flows back from households to the firm sector. Thus entire income of economy comes back to firms in the form of sales revenue. Clearly one man's (or sector's) expenditure is other man's (or sector's) income. 

 National Income refers to net money value of all the final goods and services produced by the normal residents of a country during an accounting year.

Circular Flow of Income: The circular flow means the unending flows of production of goods and services, income and expenditure in an economy. It shows the redistribution of income in a circular manner between production unit and households.

A firm's net value added at FC is distributed as factor income in the form of rent, wages, interest and profit. Sum of rent, interest and profit (i.e., income from property and entrepreneurship) is called operating surplus.
Clearly, operating sulphus is zero :
(i) When loss to the firm is equal to sum of rent, interest and profit. In other words, income generated by the firm is just equal to compensation of employees
(ii) In general government enterprises and non-profit institutions serving households which do not earn income from property and entrepreneurship.

Deficient Demand And Its Related Concepts

1. Deficient Demand or Deflationary Gap:
(a) When in an economy, aggregate demand falls short of aggregate supply at full employment level, the demand is said to be a deficient demand.b) Deflationary gap is the gap showing Demand
deficient of current aggregate demand over ‘aggregate supply at the level of full employment’. It is called deflationary because it leads to deflation (continuous fall in prices).
(c) Let us suppose that an imaginary economy by employing all its available resources can produce 10,000 quintals of rice. If aggregate demand of rice is, say 8,000 quin tals, this demand will be called a deficient demand and the gap of 2000 quintals will be called as deflationary gap. Clearly here equilibrium between AD and AS is at a point less than level of full employment. Keynes called it an under employment equilibrium.
2. Reasons or causes for deficient demand: The main reasons for deficient demand are apparently the decrease in four components of aggregate demand:
(a) Decrease in household consumption demand due to fall in propensity to consume.
(b) Decrease in private investment demand because of fall in credit facilities.
(c) Decrease in public (government) expenditure.
(d) Decrease in export demand.
(e) Decrease in money supply or decrease in disposable income.