World vs Words

About GST in India

2021-03-20T23:54:00.005+05:30

About GST in India

In this article we are discussing some important points about GST, which are really important for our knowledge and exam also.

After the Independence of India, GST implication on indirect tax structure in India is a historical reform. The implication of GST in Indian indirect tax structure came through a long journey and massive discussion. GST has been implemented in Indian tax structure on 1st July 2017. GST replaced 17 types of indirect taxes of state and central Government. It reduces the cascading of taxes from the tax bearer and gives a uniformity of taxes among the states, which help to develop the business throughout the country.

History of GST in India

France first adopted GST on indirect tax structure in 1954 to replace all the turnover taxes. Worldwide more than 150 country adopted GST on their indirect tax structure. In India the former Prime minister Atal Bihari Vajpayee bought the issue of GST in discussion in the year 2000. The issue of GST discussed in the report of Kelkar task force in 2003. The empowered committee finalized views over GST and submitted report in 2008, titled it “A model and road map for Good and Service tax in India”.

Must read - 1) What is Goods and service tax and its types?

2) Progressive, Proportional and Regressive tax, Definition and Examples

The 122^nd Amendment GST bill was introduced in the Lok Sabha by Union Finance Minister Arun Jaitely on 19^th December 2014. Both the house passed and cleared the bill and Rashtrapati (President of India) signed the bill on 8^th September 2016.In constitution 101 amendment bill included as a GST bill. India following the Canada GST structure and after implementation Assam was the first state who adopted GST in their indirect tax structure and Jammu & Kashmir was the last state who adopted GST on their indirect taxes later. In Article 269A I-GST included in the constitution and GST council included in Article number 279-A. As per the GST rule generally we have to clear the return tax file three times in a month, in case of any negligence, you have to be punished five years in jail.

There are four types of GST in India C-GST, S-GST,I-GST and UT-GST. Slabs of the GST are 0%, 5%, 12%, 18% and 28 %. Some commodity are exempted from the GST, they are electricity, petrol, diesel, gas and alcohol.

When we registered GST we get 15 digit GST identification number which is called GSTIN, the full form of GSTR is Good and Service Tax Return.

What is Goods and service tax and its types?

2021-02-26T23:00:00.001+05:30

What is Goods and service tax and its types

What is Goods and service tax and its types

The full form of GST is Good and Service Tax (GST). In this article we are discussing about the GST, its types, what is GSTR? What are GSTIN and GSTN? Here we are taking the example of India because India Government implemented the GST in its tax system on IST July 2017 and since it makes some significant changes in the indirect tax system of India.

Tax system is divided into two types,Direct tax and Indirect tax. Direct tax, which Government levied directly on the tax payer, like Income tax, corporation tax, property tax, wealth tax, gift tax, Interest tax etc... These types of direct tax are also known as Progressive tax or it may be Proportional tax (click the link to know the progressive and proportional tax). On the other hand Government also levied some tax on purchase and sale of goods it is known as indirect tax. Indirect tax is imposed without knowing the ability of the tax payer, so it is also known as the Regressive tax system. There were mainly 17 types of indirect tax exists before the implementation of GST in India , like custom duty, exercise duty, service tax, sales tax, vat (Value added tax)octroi duty(local tax )etc.

GST mainly replaced the 17 types of indirect taxes and makes a unified tax system all over the country to make a balanced growth and development all over the country. Moreover, it meets up the gap between the dualistic economics status.

So it is very much clear that GST levied only purchase and sales of the goods and it replace the indirect tax only, Direct tax is not included in the GST system.

Now the question is who are paying the GST?

If the annual turnover of a business is more than or 20 lakes per year then the company has to pay GST. Suppose a company yearly invest and produce goods of Rs 20 lakes and sell it on Rs 22 lakes then his profit is 2 lakes. Here company annual turnover is above 20 lakes, so company bound to pay GST. The regime of GST has been relaxed in hilly regions where it is consider 10 lakes annually turnover.

But the annual turnover of Rs20 lakes is valid if the products produced and sell are limited within the state, but if the product produced at one state and sell at another state and if the transaction is one rupee then as per GST norms you have to pay tax. On the other hand the E-commerce businesses also have to pay GST if they sell any single amount of goods within or outside the states.

Must read-

What is marginal utility? Diminishing marginal utility with examples

Types of GST

There are mainly four types of GST; they are C-GST, S-GST, UT-GST and I-GST. The full form of these four types of GST are C-GST --- Central Goods and Service Tax , S-GST --- State Goods and Service Tax, UT-GST---- Union Territory Goods and Service Tax, I-GST------ Integrated Goods and Service tax

Now we are discussing these four types of GST one by one

C-GST

C-GST is the central tax which center Government levied when goods purchased or sold within the state, or it may be called central tax for intra state business. C-GST is subsuming all the central Government indirect taxes after the implementation of GST.

S-GST

S-GST is the state Government tax, which state Government levied on purchased and sale of the Goods within the state. It also replace the all types of local and state Government taxes ,which State government levied before the implementation of GST.

Now, C-GST and S-GST are jointly charged as a GST when goods are purchased and sale within the state.

Suppose you purchased a sewing machine, which is come under the 12% GST slabs .So your sewing machine produced and sale within the same state and its cost is Rs5000. Now the GST charged on this sewing machine is RS 600 as per 12% slabs. So, this 12% divided on state and center as C-GST and S-GST. That is C- GST= Rs 300 and S-GST = Rs300

UT-GST

India has 8 union territories, like Delhi, Pondicherry, Ladakh etc. Here instead of S-GST Union territories levied UT- GST. SO if any product produced and sold within the union territories then Government levied GST, which is divided into UT-GST and C-GST. Because Union territory is a part of the center, so central Government charges C-GST and union territory government charges UT- GST.

I-GST

I-GST is levied when goods are produced in one state and sold in another state. In this case if you cross the state border for selling the product then you have to pay I-GST instead of C-GST or S-GST. I-GST which is charged by the central Government also divided into C-GST and S-GST give to the state where the product is sold not to the state where the product is produced. Let’s take an example which clarifies the whole topics.

Suppose, a sewing machine is produced in Maharashtra and sold in Odisha ( two different states of India ) then when the sewing machine is sold in Odisha then central Government charged I-GST. Central government charged 12 % I-GST, which central Government divided into 6% as a C-GST and another 6% give to Odisha state as the product is sold in Odisha. For this reason I-GST is also known as the Destination GST.

I-GST reduced the tax difficulties, earlier different states charges different rates of taxes, so the investors are confused where to invest. Investors always searched which states charges lowest tax. These limited states enjoyed the produced and selling taxes of the products. So there arises an unbalanced growth and developed a dual economic structures. Now the same tax structures solved the problems of unbalanced growth among the states. Investors are also happy and able to set up their factories where the demands of the products are high. States, like Maharashtra where the factories set up they get employments and states where the products sold get GST.

The whole country now enjoys the same amount of tax burden.

So in short we can say that, if a product is produced and sold within the state you have to pay C-GST + S-GST

If the product produced and sold within the union territories you have to pay

C-GST +UT-GST

If the product produced at one state and sold in another state you have to pay

I-GST =C-GST + S-GST (The state where the product sold or destination state)

Slabs of GST

There are mainly four types of tax slabs under GST and near 1800 goods and services are fitted in to the regime of GST. The slabs are 5%, 12%, 18%, and 28% .Some necessary goods like agriculture products, vegetables, fruits, flowers, eggs, milk are exempted from the GST.

In 5 % slabs the product like fertilizers, frozen vegetables, spices, takeaway food etc. included in GST.

In 12 % slabs the costly products like ghee, nuts, purses, handbags etc. are included.

In 18% slabs washing machine, camera, IT services, telecom services included

In 28 % slabs Motorcycles, car, stay at five star hotels, luxury items are included.

Some products which are not included in GST are Petrol, Diesels, Gas, Electric and Alcohols. In these products different states imposed different tax rates. So it has shown that the price of these products is not same among the states. Recently, due to the heavy hike of the price of petrol some states like ASSAM, West Bengal, Meghalaya and Rajasthan reduced state VAT. This is possible because the individual states imposed VAT on their own, so they take this decision as per the requirements.

What is GSTR?

The full form of GSTR is Goods and service tax return. That is, when you sold any products you charges GST from the buyer as per the GST norms. This amount of GST now you have to pay to the Government as per the rule. GST returns take place three times in a month.

What is GSTIN?

The full form of GSTIN is Goods and service tax Identification Number. It is the 15 digits number .When you registered your company for business in tax department you got this number. The first two digits is the state code, next ten digits is your PAN number (Permanent Account Number) and the last three digits is the computer generated number.

GST Council

GST council members solve the problems of GST through meeting and revised the tax rates as per the requirements. There are 33 members in GST council. On 12^th September 2016 under the Article 279A GST council amended in the constitution with effect.

What is GSTN?

The full form of GSTN is Goods and service tax Network. The whole GST calculations and submission process controlled through GSTN.

Conclusion

GST is the important concept in Indian indirect tax structures. GST in tax system first started in France on 1954. It implemented to overcome the unbalanced growth of the economy.

Functions of money and Measures of money supply M1, M2, M3, M4

2021-02-19T00:31:00.058+05:30

Functions of money and Measures of money supply M1, M2, M3, M4

Functions of money and Measures of money supply M_1,M₂, M₃, M₄

All we know that money is a medium of exchange. After barter economy it is the most reliable and functional medium of exchange. Money is considered as a medium of exchange because it consist some basic qualities.

Functions of money

In the age of barter economy the medium of exchange was not able to store for long times nor they can divisible as per the requirements; moreover it was difficult to calculate the exact value of the goods. So it was very much essential that the medium of exchange must be the above qualities. That is, the medium of exchange must be stored for long times, it must be divisible in small units and it must be the standard unit by which we can easily calculate the value of the goods. Money as a medium of exchange poses all the qualities. So, in one sentence we can say that,

Money is a matter of function four,

“A medium, a measure, a standard and a store”.

Money is considered as the most liquid asset, because we can use it as a medium of exchange in anytime and anywhere. It is commonly acceptable, its token value is almost zero and it is easy to store also.

Money is considered as a measuring unit of any commodity, though the standard unit of money we can easily calculate the value of the goods; moreover money is divisible into small units. So, it is very much easy to calculate the value of the small units of any goods.

What is the token value of money?

In earlier time the money held the same amount of its value. In those days people had used gold or silver coin, but now a day’s people used token value of money. That means if you melted the coin, you cannot get the same value which the coin hold as a value. More over the paper notes holds almost zero value. In paper notes we found the signature of the Governor of Reserve bank of India (Central bank of India), where it is clearly mentioned that the Governor of central bank promises to pay that amount of sum to the bearer of that note.

As we know that money is a stock concept but over time it is flow concept. So the term supply of money we mean the amount of money in the economy at that particular period of time. In an economy money can be held in various forms ,like money can held in most liquid form in the hands of the public, or it may be the in the bank in form of credit, or demand deposits with the commercial banks, commercial bank time deposits, post office time deposits, credit creation of commercial banks etc.

Must read- 1) Money multiplier theory of money supply

2) Invisible hand

Measures of money supply M_1,M₂, M₃, M₄

In 1977 Reserve bank of India (RBI) published the four measures of money supply, which is like the following

· M₁= Currency held in public hand (C) +demand deposits of the public (DD) + other deposits (OD)

· M₁= C +DD+OD

· M₂= M1 + saving deposits with post office saving banks.

· M₃ = M₁ + time deposits of the public with banks.

· M₄ = M₃ + total post office deposits.

M₃ is known as the broad money

RBI working group redefined the parameter of measurement of money supply latter. M₂ and M₄ now redefined and saving bank deposits of post office and all deposits of post office included in M₂ and M₄ have been dropped. There are now only three monetary aggregates-M₁, M₂, and M_3.

Let us look on new Revised Monetary measures……….

· M₁ = Currency held in public hand (C) +demand deposits of the public (DD) + other deposits (OD)

So, there is no change in the calculation in M1

· M₂ = M₁+Time liabilities portion of savings deposits with banks + certificate of deposits issued by banks + term deposits maturing within one year.

· M₃ = M₂ + term deposits with banks with maturity of over one year + call/ term borrowing of the banking system.

Conclusion- M1, M2 and M3 are the new measurement of money supply, M3 is known as the broad money. Money multiplier is the important concept of money supply.

What is marginal utility? Diminishing marginal utility with examples

2021-01-17T00:41:00.001+05:30

What is marginal utility? Diminishing marginal utility with examples

Before going to the marginal utility we have to clear the concept of utility

Utility is the satisfaction which we derived after the consumption of particular commodity or services. So if we consume anything we derived some satisfaction from it.

For example, if we take a cup of coffee during the cold winter days we obtained a level of satisfaction, these satisfactions is called utility.

That is, total utility is always a positive, but diminishing concept. So, total utility curve is concave to the origin.

What is marginal utility?

Marginal utility is the additional satisfaction that we derived by consuming an extra unit of any commodity. So, marginal utility is the additional utility of any commodity, which we get by consuming more than a unit of that particular commodity.

For example, if we take an additional cup of coffee during the same period of time, the marginal satisfaction by consuming this extra cup of coffee that we are getting is known as marginal utility.

Marginal utility is always diminishing in nature, because if we consume more and more amount of any commodity the satisfaction that we get from the additional unit is diminishing. Suppose, at the same duration of time we take 5 cup of coffee consistently. Then the additional utility that we derived from the last cup is not giving us so much utility that we derived from the first cup. So, marginal utility is diminishing in nature.

What is diminishing marginal utility?

In economics, if a consumer consume a particular commodity consistently that is, without any break then the additional utility that the consumer derived is diminishing. This is known as diminishing marginal utility.

For example, if a consumer consumes too much cup of coffee during the same duration of time, he/she is feeling bad, or may be faces health issues.

Marginal utility curve

Examples of diminishing marginal utility

In real life there are dozens of example of diminishing marginal utility. When we travel short distance, the fair of the bus is high but at the same time if we travel long distance in the same bus, the additional fare that we have to pay is small amount. In direct tax system also government charges lower percentage of tax rates of low income group persons and higher percentage of tax rates of high income group persons. This tax system is known as progressive tax system.

Must read- Diamond water paradox

Utility and its kinds with differences

Algebraic derivation of marginal utility

Suppose, consumer is consumes q1 quantity of the commodity Q. So the utility derived from the first unit is U=U1 (q1). As the same process if the consumer consumes q2, q3, q4, q5 of the same commodity then the utility he /she get is U2 (q2),U3 (q3), U4 (q4),U5 (q5) and so on..

[If we use cardinal utility approach then utility is additive, on the other hand if we use ordinal utility we can ranked the preferred bundles]

Total utility curve

Now we can write the total utility, U=U (q), from the derivation of this function we can get marginal utility. So the Marginal utility, U’=du/dq. Total utility is always positive but as we consume more and more unit of a commodity marginal utility of the successive unit is decreased. That means du/dq >0, but d2U/dq2 <0.

Since the first Oder derivative is positive that means total utility curve is upward rising but second Oder derivative is negative that means total utility curve is concave to the origin.

Money multiplier theory of money supply

2021-01-07T23:41:00.004+05:30

Money multiplier theory of money supply
Money multiplier theory of money supply

Money multiplier theory of money supply is one of the most vital topics in macro economics theories. Before going to multiplier theory we are discussing about money supply.
The supply of money is a stock concept at a particular point of time, but over time money supply is a flow concept. Total money supply at a particular point of time in an economy means total quantity of money held in economy at that time.
Total money supply in an economy basically depends on following determinants; below we are discussing the determinants of money supply and money multiplier one by one.

1)      Currency in public hand- The main and foremost determinants of money supply is currency held in public hand. People held currency in the form of paper notes or coins, these types of currency consider as a most liquid assets. These types of currency people can spend at any time anywhere and it has acceptable. So, currency notes and coins consider as a most liquid assets. We consider currency in public hand as C.
2)      Commercial bank reserves- commercial banks reserves a certain amount of liquid money from the bank deposits, to meet up the immediate public demands. We indicate it as R.
3)      Total bank deposits- Here we indicate total bank deposits as D. people deposits money in the bank ,after reserves a certain amount, bank lending the rest amount of money to the public as per demand.Here bank does not lend money in cash instead of that bank deposited the lending amount in customers passbook. So here bank create some amount of money in books of accounts. This created money is also the part of money supply, known as demand deposits.
Must read-1)Stock and Flow concept.

2) Progressive,Proportional and Regressive tax

High powered money-    High powered money indicated as H .High powered money is the sum of the currency held in public hand in the forms of notes and coins, and commercial bank reserves. So, high powered money is the most important and vital part of money multiplier because it is in liquid form. We indicate it as,   H=C+R
Total money supply- Total money supply in the economy is the sum total of currency held in public hand and total demand deposits. Here money indicates as M.
So,   M= C+D
Now the Algebraic derivation of money multiplier is discussed below
We got two equations   M=C+D…………..1
                                         H=C+R ……………….2
Dividing equation 2 by M We get…
H/M=C/M+R/M …………..3
We can write    R/M= R/D*D/M …………4
[If we divided equation no 1 by M then we get
M/M=C/M+D/M
Or, 1=C/M+D/M
Or, 1- C/M=D/M]
Putting the value of D/M in equation no 4 we get

R/M=R/D*(1-C/M)

Putting the value of R/M in equation no 3 we get
       H/M= C/M+ R/D (1-C/M)
Or, M/H =1/{C/M +R/D (1-C/M)}
Or, M= [1/{C/M +R/D (1-C/M)}]* H
Or, M= mH
Here, m is the money multiplier and m= 1/{C/M +R/D (1-C/M)}
C/M is the ratio of Public desire to hold currency out of total money supply.
R/D is the ratio of total reserves of commercial banks out of deposits liabilities.
Conclusion- The money multiplier identity M= mH, shows the mechanical dependency of the money supply on the stock of high powered money. So it can be said there is a direct relationship between high powered money and money supply. So if the high powered money increases in the economy money supply will be increased.

Progressive, Proportional and Regressive tax, Definition and Examples

2020-12-23T00:47:00.003+05:30

Progressive, Proportional and Regressive tax, Definition and Examples

Progressive, Proportional and Regressive tax, Definition and Examples

Progressive, proportional and regressive tax systems are the three types of way how the government imposed the taxes and how it affected the tax payer. In this article we are discussing the three types of tax system with suitable examples and clarify the ideas.

Definition of progressive tax

Progressive tax is a tax system where tax payer pay higher tax rate as his /her taxable income goes up.

It is called progressive because it imposed lower tax burden on low income group and higher tax rate to the higher income group, to bring the equality in the society. In progressive tax system different tax rates are prescribed for different levels of incomes slabs. Progressive tax system tries to dissolve the inequality from the society.

Example of progressive tax

In progressive tax system government imposed different tax rate as the slab of the income changes. The percentage of tax rate is lower for lower income group whereas tax rate is higher for higher income group. Suppose the income level of a group of people is Rs 2 lakes per year, then the tax rate imposed on them will be zero. Here government realizes that the tax payer will not be able to pay tax within these income levels, so these levels of income groups are exempt from the income tax. On the other hand a another group of people whose yearly income is Rs 5 lakhs-7.5 lakes government has imposed the tax rate is 10%.i.e, the tax payer have to pay 10% of his /her taxable income to the government as a tax. If the level of income is 12.5 lakhs-15 lakes then the tax rate will be 25% of his/her taxable income. Every year when the government has announced the financial budget, declare the tax slab and the tax rate of the particular slabs.

As we all know that the marginal utility of any commodity is diminishing as the consumer consuming more amount of that commodity. So the marginal utility of money is also diminishing as the person earned higher level of income. Suppose government announce 10% tax rate for all the income group, then the person whose taxable income is Rs 2 lakes per year have to pay Rs20000 as a tax on the other hand a person whose taxable income is Rs 10 lakes have to pay Rs 100000 as a tax, but as the marginal utility diminishing the person whose income is Rs 2 lakes bear more burden of tax than the person who earned Rs 10 lakes. So as per progressive and fair judgment of tax rate progressive tax is good for the country. Many developed and developing countries like, Germany, India, Denmark, Belgium imposed progressive tax system.

Definition of Proportional tax system

Proportional tax system means when government fixed the percentage of tax rate for all level of income groups is known as proportional tax system. In proportional tax system government does not divided taxable income slabs only fixed the percentage of income as a tax that the tax payer pay the government. Proportional tax system is also known as flat tax.

Example of Proportional tax

In proportional tax system, suppose a group of people taxable income is Rs2.5 lakes and government fixed tax rate is 15%, then this group of people have to pay 15% of his taxable income. On the other hand another group of people taxable income is Rs12 lakes,then they have to pay 15% are of his/her taxable income .Countries like Bulgaria; East Timor, Estonia, Georgia imposed proportional tax rates.

Must read---- Diamond water paradox

Invisible hand in economics

Definition of Regressive tax

Regressive tax system means, regardless of any type of tax slabs when government imposed same amount of tax for all. In regressive tax system low income group bear the larger amount of tax burden compare to high income group. Indirect tax is considered as a regressive tax.

Example of Regressive tax

Suppose, government imposed 7 % of GST on a pair of shoes whose value is Rs 2000. So the value of the shoe with tax is now Rs2140. A low income group person whose monthly income is Rs 20000 bear the higher tax burden than the higher income group whose monthly income is Rs80000. Any type of indirect tax like service tax, sales tax, Good and service tax (GST) consider as a regressive tax.

Tax slabs (P.A)	Progressive tax			Proportional tax	Regressive tax
0 ----Rs250000	Nil			15%	Rs140
Rs 250001-500000	5%			15%	Rs140
Rs500001-7,50000	10%			15%	Rs140
Rs 7,50000-10,00000		15%	15%		Rs140

Conclusions

In these three types of tax system progressive tax is considered most relevant and aggressive in social point of view, so it is often known as fair tax rates.

Stock & Flow Concept

2020-11-21T00:17:00.004+05:30

Stock & Flow Concept

Stock and Flow Concept

In economics we should have very clear idea about the stock and the flow concept. There are a number of differences between them. Over micro economics elements( like demand, supply, capital gain, total wealth) and macro economics elements( like national income, total consumption, total investment, total money supply, total capital stock GDP), flow and stock concept play a vital role.

Stock and flow concept mainly measured on the basis of particular time period. On this particular time period some elements are flow and some are stock, although both the flow and stock concept are variable in nature. That is, it’s changing over the time period. In long run all the elements are flow.

Flow variable concept

Flow variable concept mainly measured on the basis of particular time references. It may be one day, One week, one month or one year. It mainly measures the flow of income or changes of income or other elements of a particular time references. So time is very important for flow concept.

Suppose we consider the income of an individual, to define it properly we must be consider the time period of the income. If we say that the income of an individual is $200 then it is meaningless. It does not clear whether the Individual earned $200 in a month or in a year. But if we specifically say that the person earned $200 in a year then it should be meaningful. Likewise national income is also a flow concept because we measure it as per year basis. Other flow variables are investment, rent profit, saving, expenditure, interest, supply, demand etc.

Must read with this-1) Invisible hand in economics

2) diamond water paradox

Stock variable concept

Stock variable is measured without the time dimension. Stock variable is measured on a particular point of time. Suppose total wealth of a nation is fixed on a point of time, so it is a stock concept. Likewise, total money supply, total capital stock, total bank deposits all are stock concepts. These all elements all are still at particular point of time.

Here one question arises on our mind is GDP is a flow concept or stock concept? GDP that is gross domestic product (total monetary or market product finished goods or services produced within the geographical boundary of a country in a specific time period.) is obviously a flow concept because it is measured within one year of time period.

Suppose at particular point of time the total wealth of an individual is K0 and at the end of the year when he /she calculate his/her wealth is K1 .So here wealth is fixed at the particular point of time at the starting of the year and at the end of the year. Now if he /she calculate how much wealth increased during these period of time, then he/she get it is K1-K0. This K1-K0 is the flow of income which increased his/ her wealth. So income is a flow concept.

We may have taken the next example, suppose there is a tank of water, which is half filled, so the water which stored in this tank is stock concept because it is fixed on a particular point of time. Suppose one bucket water more added in this tank, the water of this tank increased and now fixed on another level. Here bucket of water is a flow concept.

Invisible hand

2020-11-16T23:38:00.001+05:30

Invisible hand

Definition of invisible hand

Invisible hand means a free market situation, where economics factors moves freely without the interference of the external factors. The existence of this concept introduced first by Adam Smith. We observe the existence of free market situation in mostly in capitalist economics where there is no government interference in the market force.

Explanation of invisible hand

In free market situation market interference operate freely without the restriction. In such a market economy there are millions of consumer and producer taking independent decisions. These decisions determine the allocation of resources. The market mechanism or price system refers to a form of economic organization through which producer and consumer interact. Here market mechanism solves three basic questions, what to produce, how to produce and for whom to produced?

Adam Smith realize even if there is millions of consumers and producers in the market, there is no chaos in the market and the market system run smoothly in economic Oder. Economic Oder runs smoothly because here individual can able to take decisions privately and individual decisions collectively operate as a public decision. Price occupies an important factor in the market, so it is known as price economy.

In these system if price of any product increases, producer aggressively want to produce more of that product to increase their profit. As a result when a large number of producer produce large quantity of the same product the price of the product automatically reduced. Here the other factor remains constant (i.e., no interference of the government). The mechanism by which the price of the product reduced or increased by only the market system is known as invisible hand. It is assumed that there may be an invisible hand in the market system, which can control the market system and bring it back in the previous situation.

Related Article- 1) Know what is utility?

2) Know what is economics?

Example of invisible hand mechanism

Let’s, take an example of real market invisible hand. Suppose in the market alternative commodities are wheat and rice and people prefer both of the commodities as a same manner. Now if the price of wheat higher than the rice, then producers have been thought that they will earn more money to produce more of wheat instead of rice. So producer of rice turn to produce wheat instead of large amount of rice. Here one think must be mentioned that individual producer or consumer decision does not affect the market decision .But collective action of all the consumer and producer make a significant effect in the market. In the market perfect completion prevails.

So if the producer produced more wheat than the rice then automatically the production of wheat grow up and the price will fall, on the other hand as the production of rice fall its price go up. So now the producer shift towards the production rice to get profits. The market will be achieved a balanced position without the interference of any other external factors. An imaginary hand which controls the mechanism without the interference of any external factor is known as Invisible hand.

Diamond water paradox

2020-09-28T21:18:00.002+05:30

Diamond water paradox

In Economics value verses price paradox commonly known as Diamond Water paradox. Here diamond and water taken as an example, to explain the basic confusion arises about the products which we consume for necessity and which we consume as a luxury items.

This paradox explain the fact that though the necessity things are essential for life and we cannot live without it, its price is low, in spite of that luxury things are more costly. Economist like Adam smith and David Ricardo tried to find out the valuable answer for this diamond Water paradox, but they had been unable to find out a satisfaction answer of it.

This diamond Water paradox, later explained by different economists in different way they use the labor theory of value, marginal utility approaches and availability or scarcity of the product etc.

Here we are discussing one by one, this Diamond Water paradox.

Earlier micro economics theory is known as price theory, because it mainly concerned with the determination of price. Price plays a major role in micro economics theory. At present we regard value is being more or less synonymous with price but earlier value of a commodity divinely determined where price of the commodity set by men. So there was a large difference between value in use and value of exchange.

Adam Smith and David Ricardo elaborately explain this value in use and value in exchange paradox and illustrated the famous diamond water paradox. They explained that water had great value in use but less value in exchange, where diamond is less value in use but high value in exchange. Water had essential for life but its price is low where diamond had not essential for life but its price is high.

Availability and Scarcity method

According to the economists availability of water is huge in present situation respect of the diamond and the demand of scarce product is always high. Diamond is scarce among us, so its price is high. On the other hand water is huge in supply, so its price is low. Economists explain that, if we face a situation where diamond is huge in supply and water is scarce obviously, water price will be high.

Marginal utility approach

Marginal utility means, the utility that we derived to consume from one extra unit of the commodity. Suppose we take a cup of coffee and immediately after that we take a next cup of coffee, so the additional utility that we gain from the next cup of coffee is known as marginal utility .Marginal utility is always diminishing in character (we always derived less utility from the additional unit we consumed).

Alfred Marshall draw demand curve on the basis of marginal utility theory. So the demand curve is downward slopping. Marshall explained that the price of any product is not only determined by its demand but also depend on supply of the product. The intersection point of demand and supply determined the price. So as the supply of the water is huge according to demand its price is low. On the other hand supply of diamond is low, so its price is high.

Diamond water paradox

Labor theory of value

According to labor theory of value, economists explain that the value of such product is always high which product, production cost is high. In this sense the price of diamond is high because its production cost is too much higher than the water.

Here I obviously want to clear one of your confusion, if we use two types of techniques that are traditional and modern technique to produce a particular commodity and the production cost of traditional technique is higher than the modern technique; than it does not mean that the commodity is cheaper which produced in machine.

Let’s take an example if we produce diamond with the help of the labor and at the same time we produce same diamond in machine, then as the production cost is more in use of labor in first production than the machine in second production, what will you think the cost of same diamond is sold on higher price which is produced by labor? The answer is no, because in economics we always consider those production technique which we adopt through the time period and practices. That means if we know that machine will optimally used to production of diamond and we adopt these technique than why we pay for the traditional technique.

Value verses price paradox or Diamond water paradox plays a major point of discussions during 1850-1880.Economists able to clarify a satisfactory answer by adding labor theory into it.

Utility Meaning ,Definition and types

2020-09-19T00:32:00.006+05:30

Utility Meaning ,Definition and types

In micro economics the term utility covers a major part of the discussion. So before starting micro economics study we have to clear the basis terms of economics, such as utility meaning , marginal utility, paradox of values and invisible hand of the market.

What is Utility?

Utility is a satisfaction which we derived from anything or which fulfill our needs. So everything which we consume has some satisfaction level, so we derived it. The satisfaction is called utility in economics terms.

For example, if we take a news paper read it and feed some news from it, which enhance our knowledge then news paper fulfills our needs and satisfies our wants. Here news papers have some utilities. If I do not get any type of satisfaction from any commodity, which means the utility of that commodity is zero in front of me. But it does not mean the utility of that commodity is zero in front of others. May be the commodity used and recycled and produce other things. So every thing has some utilities.

Now, how do we measure the utility? So, if we derived satisfaction from anything then we have to pay for these! Some economists had defined that utility is measurable and it is additive or subtract as per the requirements .On the other hand some economist believed that utility is not measurable ,but it will be preferred .We can preferred one bundle of commodity than the other bundle of commodities.

So utility can be measured in two ways, according to two groups of economists. That is Cardinal utility approach and Ordinal utility approach.

Must read-1) What is Economics?

2) Economic growth and Economic development

Cardinal utility approach

According to Alfred Marshall, utility is measurable and countable. According to him the margina l utility of money is constant and it is measured by a constant unit λ. Here we consider an example, suppose a consumer derived X commodity in q1 units and paid p1 price for each unit of the commodity, so total sacrifice for the particular commodity is p1q1. Now each unit of marginal utility of money is λ, so consumer sacrifice λp1q1 to get q1 units of that particular commodity X. Here if the consumer consumed q2, q3 q4 amount of X commodity, then the consumer derived U1(X1)+U2(X2)+U3(X3)+U4(X4)=U and sacrificed λ (p1q1+p2q2+p3q3+p4q4).In cardinal utility approach utility is measurable, additive and subtract.

So, U1(X1) +U2(X2) +U3(X3) +U4(X4) =U = λ (p1q1+p2q2+p3q3+p4q4).

In cardinal utility approach we assumed that marginal utility of money is constant and it is not changed. Other factors are also constant and marginal utility is diminishing in nature (i.e. the utility derived from the successive unit of a commodity is diminishing, that means if we derived more unit of any commodity utility of that commodity decreased.) On the basis cardinal measurement of utility Alfred Marshall invented the Marshallian demand curve, which is downward slopping.

The additive assumption was dropped in later versions of the cardinal utility theory. Additive implies independent utilities of the various commodities in the bundle, this assumption unrealistic for the cardinal theory.

Ordinal utility approach

In ordinal utility we cannot measure utility, we only rank them as per the satisfaction derived from these bundles. We can say that utility of bundle A is greater than the utility of bundle B. But how much we cannot say. Here ranking is matter and different utility levels are interdependent. Suppose, a consumer consumes q1 and q2 amount of X1 and X2 commodity so he /she derived U1=U1 (q1, q2) and U2= U2 (q1, q2) of utility.

Here, U= U1 (q1, q2), U2 (q1, q2)

U= f (U1, U2)

U = f (q1, q2)

In cardinal utility approach we say that utility is additive that means U1+U2+ U3+U4 =U, but here we see that utility is not additive. In ordinal utility approach transitivity play a vital role.

Let’s discuss about transitivity assumption, in ordinal utility approach if a consumer prefer bundle B than the bundle A than B is preferred bundle than the bundle A, similarly if bundle C is prefer bundle than the bundle B than C is preferred bundle than the B. In transitivity assumptions if B preferred than A and C preferred than B than it can be say that C preferred than A.

B >A, C > B, then C >A

On the basis of ordinal utility approach Jr. Hicks invented the indifference curve.

Let's take a look of some differences of cardinal and ordinal utility approaches.

Differences between Cardinal utility approach and Ordinal utility approach

Cardinal utility approach

Utility derived from the commodity is measurable and measured by utils.

Ordinal utility approach

Utility not measurable only ranked according to satisfaction derived from the commodity.

Utility is additive in nature.

Utility is not additive

Utility is not transitive

It is less practical.

Utility is transitive, according to preference

i.e. B > A, C > B, then C > A

It is more practical.

Draw Marshallian demand curve on the basis of cardinal approach.

Draw Indifference curve on the

basis of ordinal utility approach.

Cardinal utility approach invented by Prof.Marshall.

Ordinal utility approach invented by Jr.Hicks.

Example if we consume one cup of tea, utility measured 70 utils and two biscuits 50 utils. So total utility 70+50= 120 utils. On the other hand if we consume a cake its util is 60 and a chocolate 20 utils so total 60+20 =80 utils. Here add them. So, we can say that tea and biscuits give more utils than cake and chocolate.

Example, here tea and biscuits are a bundle of commodity and cake and chocolate is another bundle and consumer preferred tea and biscuit bundle more than the cake and chocolate bundle. Here we ranked bundle of commodities.

Must read in this sequence- 1) What is Economics?

2) Economic growth and Economic development

What is economics? How do we define economics?

2020-09-01T13:21:00.006+05:30

What is economics? How do we define economics?

What is economics? How do we define economics?

Economics is defined by a number of definitions but in every definition we are not able to covering the every aspect of economics. It has vast and huge activity. It is a social science and its cover the every aspect of ours social life and day today life. So in simply we can say that “Economics is a study of economic activities of the world”. According to Jacob Viner, "Economics is what economist do”. Economics also commonly defined as “Economics is the study of those activities that involves production and exchange among people”

Economics as an academic discipline study is not so much old. It has nearly two-three century ago when economics consider as a systematic study for the society. That means there is no economics before that? No. Economy of the world had been started from the ancient time, when people used to habituate with barter economy or may be the earlier time of that. Many ancient teachers wrote their manuscript and explain the economic, political condition of that time. Chanakya, who is also identified as Kautilya, the great Indian teacher, authored of the Indian political treatise, the Arthashasstra between 3^rd century BCE and the 3^rd century CE.

Earlier time when barter economics had existed people used to pay more of their valuable things which commodity had a large demand in the market. So economics start from the demand and supply concept from the earlier time. Later, when people had realized the importance of medium of exchange and introduced price as a medium of exchange then economics had consider as a price theory.

During the sixteenth to the three fourth of the eighteenth century the world has being conducted according to the doctrine of mercantilism. Mercantile believed that the power of nation lied on his wealth. So according to them a country became powerful if the country was curbing its imports and promote exports. In 1776 Adam Smith introduced the free market concept in his book ‘The Wealth of Nations’. According to Adam Smith a country can achieve the prosperity if the country concentrate on its wealth and utilize the resources in optimally. Adam Smith believed on the free market mechanism. Adam Smith is considered as the father of the economics.

How economics works

Commonly when we are discussing about economics we are searching some common questions related with some social activity like demand, production, supply, cost, market situation etc. So according to Prof. Samualson any society faces three basic problems. They are 1) what commodity shall be produced and in what quantity? 2) How the good shall be produced? And 3) whom it to be produced?

So these questions are very much common in all type of economic structures. In command economy the question will be solved by the government decision and government decided the commodity type the quantity and the market power. In capitalist economy market system revealed, where the commodity type, quantity and price determines by how much incentive and profit you get from the production. The third type economics is mixed economics where command economics ad capitalist economics co exists. In mixed economics in one hand government control the economy by solving the answers on respect of the social aspect and on the other hand capitalist solve the problem by free market mechanism and deal with the production on respect of the profit issues.

So in every aspect we are mainly solving the three main basic questions.

Economics as a study

We are mainly divided into two parts of the economics in respect of the study of economics .They are Micro economics and Macro economics. These terms were first used by Ragner Frisch. The word Micro comes from the Greek word 'Mikros' which means small and macro comes from Greek word 'Makros' which means large.

Micro Economics

Micro economics deals with the theory and analysis of individual behavior. In micro economics we are mainly focusing on Individual Consumer behavior, its demand, supply, production theory, cost theory and different market structures and its behavior. General equilibrium theory and Welfare economics is also a important part of the Micro economics study.

Macro Economics

Macro Economics deals with the theory and analysis of aggregation sense. In macro economics we are dealing with government policies, total national output, national income, total consumption and aggregation investment etc.

Beside micro and macro economics now a days we are concentrate on modern economics, development economics and International trade theory.

Now a day’s different theory developed on the theory of internal and external trade. In international trade theory we are analyzing how a county improve their trade with absolute and comparative advantages of production and with the help of the resources.

In development economics we are focusing on various theories to develop the countries growth and development. We are analyzing different theories on aspect of developed and developing countries.

What is Managerial economics?

Managerial economics, has also known to us as a business economics. A bunch of micro economic theory which analytically developed from the study can be used in managerial decision making. Such methods developed on demand and cost analysis. Different micro economic models help the decisions maker in business enterprises

Conclusion

So economics is a study of social science and we can divide it in to two categories. One is positive category and other is normative category. Positive economy concerned to describe the fact, circumstances, relationship in the economy. It explains theories and laws in observed phenomena. On the other hand normative economy involves ethics and value judgment. It describes what should be in the economy if we adopt some laws or theories.

In modern times various new theories also developed due to the massive structural change of the market strategies and change of the demand and supply concept of the society.

Mahatma Gandhi National Rural Employment Grantee Act,(MGNREGA),UPSC,2020

2020-08-19T08:42:00.020+05:30

Mahatma Gandhi National Rural Employment Grantee Act,(MGNREGA),UPSC,2020

Mahatma Gandhi National Rural Employment Grantee Act,(MGNREGA),UPSC,2020

MGNREGA, the full form of MGNREGA is Mahatma Gandhi National Rural Employment Guarantee Act. It is an act to get 100 days of work based on demands. The act initially known as NREGA that was National Rural Employment Guarantee Act and it was notified on 7th September 2005. On 2^nd February 2006 it was implemented as a trial basis on 200 district of India. The former Prime minister, Dr. Manmohan singh launched the act. On 2007-2008 additional 130 districts added as an implementation area. Later on 1^st April 2008, remaining 285 districts covered within this act. After the completion of four years, this flag ship rural employment program renamed as MGNREGA, which is Mahatma Gandhi National Rural Employment Guarantee Act. UNDP Global Human Development refers to MGNREGA is one of the social protection measures in the world and largest work force program in the world.

There is a difference between act and yojana or schemes .In yojana we follow a systematic action to achieved some specific goals, whereas act is passed by the legislature in order to make it law .So MGNREGA is an act ,which granted to get work as per demand. Schemes may be closed after the change of government or if it is not so much viable in current situation, but act is not any such option.

The implementation of MGNREGA depends on active participation of three tiers PRI (Panchayat Raj institution) and almost covers all states and UTs of India.

Objectives of MGNREGA

a) Providing 100 days work as per demand of rural households guaranteed basis on a particular financial year and create productive and durable asset to increase livelihood option of the rural households.

b) Enhance and support agriculture options to increase the productivity and decrease or removed the disguised unemployment from the agriculture.

cc c) Create assets on the name of beneficiary to enhance individual livelihood options.

d) Treated uplands through NRM (Natural Resources Management) work create watershed structure like 30-40 models, trench cum bending, stagger trench to store the runoff water and used the uplands on plantation program.

e) PMAY (Pradhan Mantri Awas Yojona) also included in MGNREGA, which ensure the rural and urban poor to provide housing.

f) Strengthening Panchayat Raj Institutions is one of the main objective of MGNREGA.

MGNREGA is a flag ship program of India government and its expenses bears both the central and state government. Such as the total cost of unskilled manual worker, 75% of cost of material wage of semi skilled and skilled worker, administrative expenses etc. bears the cost by central government. On the other hand state government bears the cost of 25% of material cost wage of semi skilled and skilled worker, unemployment allowance of those laborers who cannot get work after demand of work, Administrative expenses as per of the state government guarantee council etc.

Features of NREGA or MGNREGA

a) NREGA job card- As per the act of MGNREGA people who reside in rural area and want to work as an unskilled laborer and demand jobs through registration are getting job within the 15 days of apply. The household got granted 100 days of work security through MGNREGA, it is increased and up to 150 days in disaster based areas. In the name of adult member of the household application filled with specified his/her name, age, address, photos to the gram panchayat. After verification the household got job card with a specific job card number.

b) Unemployment allowance – In MGNREGA there is a provision to get unemployment allowance if the household not getting employment after the 15 days of job seeking through registration process. Here the unemployment allowance paid by the state government. Job seeker claim unemployment allowance with registration paper of job seeking in to the block or gram panchayat.

c) Planning organisation- Planning of the work in the village is done with the intervention of gram panchayat .Gram panchayat organized gram sabha ward wise and with the help of the gram panchayat members and villagers planning process completed. After planning, on field verification done and sanctioned the works which is viable and enhance the livelihood options of the rural poor people.

d) Execution of work- Execution of the work done with the help of the mates, rojgar sebhak and junior engineer.

Must read with this -------Agriculture revolution took place in economic development

NREGA Wage

In MGNREGA wage paid directly on the bank and post office account of the laborer. Every financial year wage rate revised as per the norm of the government. Though the wage rate is vary among the different states and extra cost is paid by the state government. Total wage rate and unemployment rate calculated with the help of the MGNREGA software system. So a clean process developed and every one can see the expenses of MGNREGA in their areas.

Facilities in working areas

In MGNREGA laborer generally get work within the 5 km from their residence and within their reside panchayat. If in any case they got work order far from their reside panchayat or 5 km away from the panchayat they get allowance for that. Through the act it was confirmed that the laborer got basic facilities in the working area like availability of shades for taking rest, a working order board, drinking water facilities and nanny appointed to help the woman laborer in the site.

Social aspect viability of MGNREGA

Largest work fare program- MGNREGA is consider as a largest work fare program as it able to some up a huge labor force under an umbrella. In agriculture sector or primary sector already disguised unemployment exist and due to the MGNREGA the work force efficiently able to engage in some creative works. Moreover to secure 100 days work MGNREGA erases the anxiety of not getting jobs after the agriculture seasons. In rural areas the higher engagement of tribal workers shows that it is helpful of poor also. In MGNREGA it is specified that any type of contractor or labor replacing machine strictly prohibited. So MGNREGA able to target the vulnerable and poor population of India.

Women empowerment- MGNREGA emphasis on equal facilities availability for both the men and women also. That means women and men worker received same payment for work. More over it was secured that one third of worker must be women.

Stop migration of laborer- Most of the labors migrate in search of work after the agriculture season. So MGNREGA help the migrated labor to get work within their reside area.

Agriculture productivity- Through MGNREGA agriculture field got special emphasis. Due to the land treatment and many NRM work agriculture difficulties overcome. Due to MGNREGA individual beneficiary got assets like well, pond etc. which enhance their livelihood.

Conclusion- Government of India continuously improves the flagship program and gives more emphasis on agriculture sector. During the covid-19 situation when most of the migrated laborer comes back and they lost their job, MGNREGA open up as a largest opportunity for migrated laborer. More over government of India announce a significant amount of money to boost up the MGNREGA.

How agriculture revolution took place in economic development

2020-07-30T23:21:00.003+05:30

How agriculture revolution took place in economic development

Here we discuss how agriculture revolution took place in economic development and take an example of a country and discuss briefly how an underdeveloped country step up towards developing country with the help of the agriculture revolution.

We measure the growth rate of a country with the help of the GDP (Gross domestic product).GDP is an important factor for an economy of a country. The monetary term of GDP is GNI (Gross national Income).The share of national income derived from the three sector of the economy; they are primary sector, secondary sector and tertiary sector.

We consider agriculture and allied activities with related agriculture as primary sector. Industry sector consider as a secondary sector and different kind of service, such as banking sector, health sector, scientific invention consider as a tertiary sector.

In underdeveloped countries primary sector or agriculture sector plays a vital role for share on national income and employment generations. In underdeveloped countries lack of literacy rate, high rate of population growth and lack of proper knowledge to utilize the resources optimally compelled them to depend on primary sector .So, pressure and dependency on the primary sector is huge. On the other hand developed countries depend marginally on primary sector, because they invent lots of techniques to produce more on a shorter period of time and utilize the recourses optimally with their skills and knowledge. Developed countries able to control their population growth rate so, pressure on agriculture land are also low. Moreover excessive productions on agriculture sector, export of productions and earn foreign currencies help them to build up secondary and tertiary sector .Most of the developed country, like Germany, UK, USA derived 2-3 % share as GDP from agriculture.

So, it is clear that as a country developed the pressure on primary sector decreased and with the help of new invention and technology secondary and tertiary sector grows. The share derived from secondary and tertiary sector play a vital role on developed countries economy.

How primary sector important for development

Primary sector or agriculture sector is really important for underdeveloped countries. As in underdeveloped countries secondary and tertiary sector not able to grow faster or generate sufficient employment, so, agriculture sector occupied a vital role.

So, it is clear that if under developed countries paying attention on agriculture sector and able to produce more with new techniques and knowledge, then it will be possible to come out the existing situations.

This is possible with the help of the agriculture revolutions, with the help of the HYV (high yielding varieties) seeds, proper knowledge of cultivation, use of pesticides and new techniques trigger the production process far better than the earlier.

Agriculture revolutions not only trigger the high rate of production but it also creates a path towards development .Below we discuss one by one………

1) Due to agriculture revolution production is high, so countries get able to food sufficiency. Dependency on foreign country reduced. Moreover the particular country now able to export agriculture product to other countries. So terms of trade improved the particular country now able to invest more on infrastructure and human development facilities.

2) The demand of agriculture equipments also increased. So the related industry on agriculture equipment will be developed. Agro product based industry also flourishes simultaneously. Different type of agriculture machines industry, fertilizers, pesticides, small related industry also developed. To reached the produced product in proper place and time good communication system is needed. So, the particular country concentrated on communication system, developed good transport system for better communication. In this way the particular country develop their health facilities, education facilities and emphasis on technological development to optimally use the resources.

3) Primary sector is the largest employment providing sector in underdeveloped countries. Dependency on land is higher in underdeveloped countries. Moreover high growth rate of population create excessive pressure on agricultural land. Small land holding, disguised unemployment, under employment are common feature in underdeveloped countries .Per capita income is also very low in agricultural sector. So, agricultural revolution opens up the space to generate new employment scope in the economy. In other words agriculture revolution release pressure from primary sector and increase per capita income in primary sector.

4) Due to the increased concentrate on secondary and tertiary sector economic growth observed and in the mean time skilled working force is also needed to operate these sectors. So, Governments more focused to develop the skills of works and human capital.

To discuss the points more elaborately, here we have taken an example of a developing country, like India.

Before the 1947 or independence of India, due to the prevailing colonial policy Indian agriculture suffered very much. The existence of Zamindari system ruins the agriculture of India. Zamindars shucked the blood of the rural poor. Farmers only left substantial yield after paying high rate of tax. So, Indian agriculture considered as a substantial occupation during the pre-independence period. After independence Indian agriculture had able to recover some around from its substantial condition, but the traditional practices not brought so much change in agriculture of India.

Moreover huge pressure on the same land decreased the marginal income of the farmers. In 1950-51 India derived 56.5 percent GDP from agriculture and 69.5 percent of working population engaged with agriculture.

So, during 1950-51 agriculture sectors provided employment of a large portion of population. In this time agriculture sector suffered with low productivity and generate disguised and under employment agriculture labors.

A big push was needed to revive the economic condition of India .On 1960-61 Indian agriculture changes massively through green revolution. Application of HYV seeds, fertilizers, pesticides and more concentrate on area specific crop, production of grains like wheat, rice and some pulses increased.

It was the turning point of Indian agriculture, latter yellow revolution (oil seeds), golden fiber revolution (jute production),golden revolution (honey and horticulture), silver fiber revolution (cotton) etc. push up the Indian agriculture in many times.

Today India occupies a leading position in world trade of agriculture products. India export mainly Basmati rice, spices, sugar, cotton and castor oil in USA, Saudi Arabia, Iran, Nepal and Bangladesh. In the current era India earn a significant amount through the trading of agro commodities. More over in 1991 new economic policy help India to develop better trade policies with the world.

India’s agriculture share in GDP on 1950-51 was 56.5%, on 1996-97 was 27.9%, 2013-14 was 17.7% and on 2019-2020 is 16.5%.

Similarly if we go through the working population engaged in agriculture sector on 1950-51 was 69.5 percent, on 1996-97 was 62 percent, on 2013-14 was 58 percent and 2019-20 is 53 percent.

How agriculture revolution took place in economic development

If we go through the bar graph, it was clearly shown that as the economy of the India develop the share of agriculture of GDP decreased and slowly its employed worker also decreased. So pressure on agriculture decreased .Simultaneously the working forces are engaged in secondary and tertiary sector. This bar graph shows that how India grows towards as a developed country.

Conclusion

Here we try to discuss briefly how an agriculture revolution helps to develop a country towards a developed country. So, agriculture revolution is an important term in economic development.

Economic Growth and Economic Development

2020-07-24T16:03:00.003+05:30

Economic Growth and Economic Development

Economic Growth and Economic Development

We used the word Economic Growth and Economic Development as a parameter of economic indicator of a country. We indicate economic growth through GDP of the country and most of the cases we often used the two words for the same meaning by mistakes, but there are a number of differences between the two words, Economic growth and Economic development. Here mainly we discuss the definition, indicator and differences of the Economic growth and Economic development. Here also we discussed the important terms of Economic development.

What do we mean by Economic growth?

Different economists have used the term economic growth to convey different meaning. In some cases the concept differ in essence, whereas the other only emphasis. Economic growth is very much vital measurement to indicate the economic well being of a nation but economic development is used as a vast sense than the economic growth. In simple sentence, it can be said that if the Gross domestic product (GDP) of a nation increases, the per ca pita income of the population increased. So the changes of national income, per ca-pita increase in income, price stability, balance of payment equilibrium and low level of unemployment are the indicator of economic growth of a nation.

So in definition we can said that increase in GDP and continuously increase in national income, per ca-pita income, going towards the price stability, balance of payment equilibrium and low level of unemployment indicate the economic growth of a nation.

Economic growth Indicator

National Income – National income of a country will be increased due to the continuously increased of GDP and GNP (Gross national product) of that country. So if the rate of growth of national income increases than the citizen of the country get better benefit from the earlier and a stable investment is possible for the nation.

Per ca-pita income- Due to the increase of national income per ca pita income of the population also increased. But if the population increased faster rate than the national income than the per ca pita income decreases and does not show as an indicator of economic growth.

Per ca pita consumption- per ca pita consumption is related with economic growth but its impact is different in developed and under developed countries. We know most of the under developed countries make not sure of their stable investment towards growth. In underdeveloped countries has limited number resources to invest. In that case if the per ca pita income increases in an underdeveloped country, people prefer to postpone their consumption with this extra income and save more. This accumulative saving flow back as an investment in underdeveloped countries .But the case is different for developed countries, if people save more in developed countries than demand will decreased. In this situation supply also decreased and investment low so consequently growth rate will decrease.

So where in an under developed countries saving is an important factor for growth, in developed countries consumption is an important factor to generate demand and gain economic growth.

Economic Growth and Economic Development

What is Economic development?

Economic development is a wide aspect than economic growth. We can measure economic growth through GDP, so it can be say that economic growth is a quantitative parameter. But in Economic development we consider the parameters like literacy, population growth, malnutrition, health facilities, housing facilities, law and order etc. So, economic development is a qualitative parameter of a country rather than the quantitative.

In Developed countries like America ,European countries attain economic development through high rate of economic growth but underdeveloped countries like, India, Pakistan, Bangladesh does not able to attain economic development through economic growth. Because most of the resources in under developed countries remain unused and people of those countries have not such capabilities to utilize the resources .So if these countries attain a high level of economic growth its benefits derived by a small portion of population and income inequalities increases. Whereas developed countries attain economic development through high level of economic growth, underdeveloped countries have to be concentrate on economic development with economic growth to eliminate inequalities.

Definition of Economic Development- Economic development does not indicate only economic growth of a country but also indicate literacy rate, population growth rate, malnutrition, health and housing facilities, law and order of the country.

Economic development Indicator

Literacy level- the benefits of economic growth will not be spread all section of society if the population till illiterate and do not able to use the resources which they have, due to the lack of knowledge. So, literacy is an important factor to utilize the resources optimally and to develop the human capacity to produce more within a time.

Population growth rate- Growth rate of population is an important factor to reach the economic development or economic growth. If the population growth rate is higher than growth rate of GDP, there is no change of per capita income and the situation will remain the same. This case is often happened in under developed countries and the benefit of growth enjoys only a small portion of the society. So the income inequality increases. In developed countries population growth rate is minimal so the population enjoy the increase per capita income due to the increase of GDP.

Decrease the income inequality- In developed countries income inequalities decreases due to the increase of GDP and the nation attain economic growth due to the increase of GDP. So it can be say that in developed countries economic development achieved due to the higher Economic growth.

Increase the importance of other sector- In under developed countries land is the important factor of production and the main share of national income comes from the agriculture sector. So there is huge chance to concentrate the income in fewer section of the society. So, as the economy step up towards development, and people able to use their knowledge, the share of national income increases from secondary and tertiary sector. It indicates that if the share of national income comes from secondary and tertiary sector more than the primary sector than it can be said that the economy growing towards economic development.

Conclusions

So in Economic development and in Economic growth, GDP is the most important factor/term. But only increase in GDP indicates the Economic growth it does not indicate Economic development. Economic development indicates the overall growth of a country moreover it indicate where the larger share of national income or GDP comes from. Large share of national income comes from secondary or tertiary sector of a country indicate it is a Developed country. Larger the share comes from primary sector of a country indicate it is an under developed countries.

Agriculture revolution and its effect

2020-07-20T15:10:00.009+05:30

Agriculture revolution and its effect

Agriculture revolution and its effect

To define Agriculture revolution and its effect, we have to discuss first the definition of Agriculture revolution their extension and implementation in different climatic condition and different irrigation facilities. Moreover one question arises on our mind that, is it is a sustainable for the long time or not?

Revolution means something changes in a rapid and faster manner than the earlier any condition and left a spot of changes on that particular period of time and longer. So basically people want revolution to change the prevailing condition and to find out the way to get the betterment. All we have heard the name of different kind of revolution like, Agriculture revolution, Industrial revolution, Democratic revolution and so on…

Definition of Agriculture revolution

Agriculture revolutions mean the change in traditional agriculture practices and adopt advanced technique to get a higher production than the prevailing production. The objective of agriculture revolution is to eradicate poverty of the country and export the excess production to earn foreign currency and improve the financial condition of the country.

"Agriculture revolutions mean the change in traditional agriculture practices and adopt advanced technique to get a higher production than the prevailing production.”

We mark them as a revolution because we want to get higher production with the help of the package of practices, used HYV (High yielding varieties) seeds and get reflective repercussions and higher production to adopt the new techniques in agriculture fields.

The use of new technique, short duration HYV seeds and pesticides in right doses, good irrigation facilities, proper drainage system configuration of land and focus on a particular area help to achieve the agriculture revolution. Huge amount of productivity in agriculture revolution not only increase the production of land but also increase the wage of the agriculture laborer. In economics one thing is related to the other in a circular motion, so when agriculture revolution happened and laborers get higher wage they demand industrial product. In developed country when demand increases supply of industrial product is also increased and there will be a higher chance that the country may experience industrial revolution simultaneously with agriculture revolution. Thus it can be said that, agriculture revolution is the key point of economic growth.

In many countries of the world agriculture revolutions have been happened, and it increased the production in two or three times, but outcome shows on some few crops and focusing on few areas. So what was the drawback that we do not achieve the full target?

So here we discuss the effect of agriculture revolution

Effect of Agriculture revolutions

The effect of agriculture revolution can be measured in two parts 1) Economic effects and 2) Sociology economic effects

Economic effect-

1) Agriculture revolution increased the production of the crop in many times but it concentrates only some particular crop .The effect of increase the production on other crop shown very small.

2) Due to the increase of production, countries gain capital profit and moreover land owner gain a profitable amount, but due to the unorganized sector the wage of laborers did not increased so much.

Sociology effect

1) Agriculture revolution gained through the use of best practices and it increased the production in many times but simultaneously create economic disparities mainly in underdeveloped countries, where agriculture sector is unorganized. Big farmers able to take the advantages because they have adequate land and they use the pesticides, HYV seeds and so on. But the small farmers do not able to left their traditional practices due to the insecurities. Moreover small farmers do not agree to take the risks of short duration crop production due to the fragmentation of land, holding small lands, inadequate information and knowledge etc.

2) Irrigation facilities are the most important part of the agricultural production, but most of the under developed countries cultivation depend on the monsoon condition. So where the farmers able to supply time to time irrigation facilities on HYV seeds, the production shows fruitful results. The climatic condition configuration of land also need to desirable out come. So the agriculture revolution mainly concentrate on some focused area rather than the whole country.

3) The use of new technology requires proper knowledge and the proper application. It has not been possible to adopt the technology without expert guidance. Here small farmers suffer a lot, because they are not able to come in proper channel to take the advantages.

4) Excessive use of pesticides become reduces the productivity of the crop. Due to inadequate knowledge and desire to get higher production farmers used overdoes of pesticides. Excessive use of chemical the insects of the land become die. So the fertility of the land gradually decreased.

5) Some time excessive production and not getting the proper market for the production, de-motivate the farmers. Excessive production of the particular crop decrease the price level and farmers faces huge loses. Most of agriculture sector in under developed countries is unorganized, so the proper marketing of the yield is not possible.

Agriculture revolution and its effect

In recent era Government took various steps to overcome the difficulties in the agriculture sector

1)      Government introduces various High yielding seeds for the small farmers with proper training facilities and guidance of the experts. Various NGOs and development sectors come forward and guided the farmers in grass root level.

2)      Government tries to increase the cropping intensity of the farmer. Farmers are habituated to produce mostly on rainy season due to the availability of water, but with the help of the various training program multi cropping system on the same land introduce. Moreover cultivation of different crop in rotation wise increases the fertility of the land. Introduce high yielding cash crops and motivate the farmers to adopt these crops beside the cultivation of cereals, to get the higher profit.

3)      The entire developed nations have the enterprise system, so it is very much essential to develop a strong entrepreneurship system in agriculture system in under developed countries also. In some countries government introduce support price, but to get the targeted goal a strong marketing system is important.

4)      Through various research work government introduce some low water consumption high yielding crops. It helps the farmer to cultivate in various scanty rainfall areas. Despite all of this, new technological system to conservation of water in sloping area introduced to recharge the water level and to increase the fertility of the land.

5)      Properly used of small land and various technological machine introduced to increase the production and replace the traditional system.

Conclusions

Agriculture revolution mark a particular point of time. High production sustainability for longer time, to overcome the crisis of food and gain self dependent of a country,we have to adopt the following steps. Better land use policies, a continuous improvement in yields, an increased availability and efficient use of inputs and credits, an adequate support by research education and extension ,proper marketing price structure helpful to achieve the success of agriculture revolution.