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DEVELOPMENT PROCESSESAND THE DEVELOPMENT

INDUSTRY

CHRONICLEIAS ACADEMYA CIVIL SERVICES CHRONICLE INITIATIVE

For almost every writer a different definition ofdevelopment exists and it is important to firstdistinguish between: Development as a state orcondition-static and Development as a process orcourse of change- dynamic.

Development is not purely an economicphenomenon but rather a multi-dimensional processinvolving reorganization and reorientation of entireeconomic and social system. Development is aprocess of improving the quality of all human liveswith three equally important aspects, namely;

(i) Raising peoples’ living levels, i.e. incomes andconsumption, levels of food, medical services,education through relevant growth processes.

(ii) Creating conditions conducive to the growthof peoples’ self-esteem through theestablishment of social, political and economicsystems and institutions which promote humandignity and respect.

(iii) Increasing peoples’ freedom to choose byenlarging the range of their choice variables,e.g. varieties of goods and services.

Alternative Interpretations of Development:-

1. Development as Economic Growth - too oftencommodity output as opposed to people isemphasized-measures of growth in GNP.

2. Development as Modernization - emphasizeson process of social change which is requiredto produce economic advancement; it examineschanges in social, psychological and politicalprocesses; How to develop good behaviour andvalues in individuals; profit seeking rather thansubsistence and self sufficiency; Shift fromcommodity to human approach withinvestment in education and skill training.

3. Development as Distributive Justice- viewdevelopment as improving basic needs; Interestin social justice which has raised three issues:-Nature of goods and services provided bygovernment, Matter of access of these publicgoods to different social classes, How burdenof development can be shared among these

classes, Target groups include small farmers,landless, urban underemployed andunemployed.

DEVELOPMENT OF TRADITIONALSOCIETY

The concept of development presents manydifficulties when we try to define it in precise terms.The difficulties arise due to complexity of theprocess of development operating in many differentcultures and under conflicting political ideologies.As a result, every analyst brings a new dimensionto the concept of development. The maincharacteristics, of traditional society in India as itexisted almost upto the end of eighteenth century are:

1. Pre-machine technology.

2. Face-to-face communication.

3. Lack of belief in progress.

Pre-Machine Technology

The most important characteristic of this societywas that it develoed within the framework oflimited pre-machine technology. This traditionalsociety was incapable of continuous flow ofinnovations which were necessary for sustainedgrowth. The pre-machine technology ascharacterised by several important eatures. In thepre-machine technology, the techniques ofproduction in any field ran into a fixed grove withthe result that any particular craft or skill remainedvirtually the same for centuries. For example, themethods of pottery-making or basket-weavingremained more or less the same for centures.Another feature of the pre-machine technology wasthe high degree of animal and human energy usedin it. That is the main reason why it is called pre-machine technology. This technology functioned ina society which lacked the basic ingredients forany fundamental changes in the social structure.The caste system led to rigid modes of thinkingand patterns of life. The commercial castes were

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trapped into a commercial way of life and theyhad no incentive to bring technological knowledgeinto the society from outside or generate itthemselves. As a result, the traditional Indiansociety did not develop the mental climate whichcould have produced an industrial revolution aswas in Europe.

Face-to-Face Communication

Traditional societies are generally characterisedby the pattern of their communications system,termed as “face-to-face”. This resulted from thelack of geographic mobility and the absence ofinfrastructure for communications. The cellularcharacter of the Hindu society with its intricatenetwork of the caste system preventedcommunication between membes of sub-castes. Thecaste system did not allow vertical social mobilityand imprisoned individuals into fairly well-knitgroups. The communication pattern in thetraditional Hindu society also determined theattitude of the masses towards the rulers, thelegitimacy of whose rule was taken for granted. Asa result, there was little participation in the processof government. Kings ruled with an aura of divinityand the masses were merely “subjects”, not“citizens”. Both the ruling elites and the religiouselites were concerned primaily with the functioningwithin the existing social system.

Lack of Belief in Progress

In all traditional socieites, the poltical andadministrative institutions were marked by a lowdegree of functional specialisation. The idea ofprogress was not totally absent in traditionalsocieties since the idea of spiritual progress (in termsof individual salvation or about cosmic evolutionof man) was fairly common. What the societylacked, however, was a belief in the possibility ofgoal-oriented secular changes through the organisedactivities of men.

THE PROCESS OF DEVELOPMENT

Development is a total transformation of societyand a movement in a consciously-chosen direction.There is no straight and linear progress fromtraditional to modern society, and neither is thistransition smooth. Development involves changeof outlook, a belief in the possibility of progressand the acceptance of objective criteria and

standards for constant improvement in all aspectsof individual and social life. The essence ofdevelopment lies in the awareness that men havethe power to direct their lives and transform thesocieyt. Borrowing technology from advancedcountries might indicate a desire to be developed,but it is not the essence of development. In fact,development is an attitude of mind; it is not toadopt, but to participate in; not to have, but to do,to be and to keep becoming. In brief, developmentis a complex one and involves several aspects:

1. Political development.

2. Social development.

3. Economic development

4. Intellectual development.

Political Development

The first requirement of political developmentis a high degree of role of specialisation (anddifferentiation) of political institutions and thegrowth of communication media. Functionaldifferentiation is represented by political parties,trade unions, religious organizations, pressuregroups and other similar organisations. In thesecond place, there is greater emphasis on rationalscientific and secular techniques for decisionmaking. The developed system acquires animpersonal character in which the law becomesmore important than the whims of men in power.The bureaucracy develops into a highly specialisedand reliable machine for tackling the problemsfacing the society, in a systematic and scientificmanner. To achieve this goal, the bureaucracy hasto be manned by a class of highly trained andprofessionally oriented civil servants. In the thirdplace, there is a great deal of mass mobilisation bythe people. It is important, however, not to identifypolitical development with a liberal democraticsociety since development cuts across politicalideologies.

Social Development

When a traditional society is developed, thereis a marked shifting of population from rural areasto urban centres under the impact ofindustrialisation, which is one of the main agentsof development. In addition to migration to citiesand towns, the growth of technology graduallyreduces the percentage of the population engaged

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in agriculture. Social development brings about amarked change in the outlook and behaviour ofsocial groups which are characterised by thefunctions they perform rather than by their caste,language and other such factors. With the growthof social development, the individual finds himselfin a wider world of freedom in which there arefewer restrictions on his ability to take decisionaffecting his life. He is free to choose his own careerrather than have it determined on the basis of hiscaste.

In a developed society, the communicationsystem links up different sectors and sections oflife, supplementing the face-to-face communicationpattern of the traditional society. Of course, thevast communication network calls for a body ofprofessional communicators such as journalists,writers, public speakers, etc. Another characteristicfeature of social development is that it puts apremium on the acquisition of skills andachievement of desirable results rather than on birthor other social factors like caste.

Economic Development

Economic development also known as“economic growth” covers many aspects of sociallife. In the first place, it involves the systematicapplication of science and technology to theprocesses of production and distribution of goodsand services. Secondly, it compels increasing use ofinanimate sources of energy in contrast to the useof human or animal energy in traditional societies.This change in the pattern of energy consumptioncan only be sustained by a revolution in theconsumption patterns f the masses demandingdiversification of production in response to variedconsumer needs. Diversified consumer needs leadto a high degree of specialisation in productiontechniques and labour skills. Rationality in economicdecisions (in determining the location of industry,for example) results in incrsed mobility of labourand emergence of a vast vareity of market processes.

Economic development of a society is impossiblewithout bringing into existence specialised humanskills. Economic development, like politicaldevelopment, gies rise to functional differentiationand to various financial institutions which feed theeconomic system. Economic development can notbe self-sistaining without setting up financial andother institutions by which the professional,managerial and technical skills are imparted. Asthe development proceeds, there is a gradual shift

from the extractive industries to the manufactureand provision of consumer goods. The linking upof natural resources with the location of industriesand the efficient operation of distribution channelsrequire a well-developed transport system. Finally,there is an emergence of a labour force consciousof the important role it is called upon to play in amodern economic system. Another important aspectof economic development is advertising which hasbrought about significant and far-reaching changesin modern life. Due to revoution in communicationmedia, adversising is able to link the ever-increasingnumber of consumers with a variety of goods andservices. Advertising has encouraged launching ofnew brands and made the consumer conscious ofhis freedom of choice. In fact, advertising is one ofthe most reliable indices of development.

Intellectual Development

Development cannot be sustained for long inany society without a corresponding and self-sustaining intellectual development characterizedby constantly increasing knowledge. This inolvesthe existence of adequate number of fact-findingand data-processing agencies, statistical units,research and development laboratories, universitiesand similar institutions. Intellectual developmentimplies the existence of intellectual elites who playa key role in sustaining the growth of technology.Intellectual development leads, in all politicalsystems, to greater emphasis on secularism and onsecularisation of the process of government andbureaucracy. It also leads to an increasing emphasison strengthering the material of life.

IMPEDIMENTS TO DEVELOPMENT

There are several impediments to developmentof a traditional society. Some of the obstacles are:

1. Lack of skills.

2. Rigid administrative system.

3. Impatience for rapid development.

4. Passion for quantitative expansion.

5. Premature politicisation.

6. Strain on law and order resources.

7. Rapid growth of population.

(1) Lack of Skills

The developing countries are usually weak inthe skills required for development. The real problem

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in training personnel for development programmeslies not in imparting information to them, but inhelping them to develop the required skills. It isnecessary, to give field workers and administratorsmore freedom to experiment and to try newapproaches; but this is precisely where the Indianprogrammes suffer.

(2) Rigid Administrative System

In India and in many other Commonwealthcountries, the administrative system inherited fromthe British rule leaves little room for freedom toexperiment. The inherited bureaucracy with itsoutmoded procedures of work and personalattitudes, inadequate delegation at all levels, tooformal supervison of field workers and poor moraleprovide a major impediment.

(3) Impatience for Rapid Development

It arises from the belief that a country mustembark on all areas of development at one time.This has led, among other things, to symbolicexpenditure on big projects to convince the massesand the outside world of the country'sdetermination to become a modern nation in theshortest possible period of time. Many poor counrieshave spent huge money on nuclear research eventhough the basic amenities of life remainunprovided for a high percentage of theirpopulation.

(4) Passion for Quantitative Expansion

Another obstacle arises from the passion for arapid quantitative expansion without attention toquality. Apart from community development,education has very rapidly expanded in India sinceindependence and new universities and collegeshave mushroomed under local pressure. The resultof this expansion has been pumping into the societya vast army of unemployed graduates.

(5) Premature Politicisation

The political leadership in developing countrieshas a marked tendency to politiciae the massprematurely. The large number of students andunemployed youths, often recruited by variouspolitical parties, contribute to the restlessness ofthe political process.

(6) Strain on Law and Order Resources

Politicisation of the mass results in considerablestrain on the law and otder resouces of the state.The leadership in India has done very little sinceindependence for rehabilitating the police in the

popular mind as protectors of the law. Attitudeformed in the popular mind towards police in theera of our freedom struggle has not yet died buthas produced a certain ambivalence towards thepolice. As a result, investment in improvement andstrengthening of the police department hasappeared to our leadrship as being in some waycontrary to the spirit of democratic welfare.

(6) Strain on Law and Order Resources

Politicisation of the mass results in considerablestrain on the law and order resources of the state.The leadership in India has done very little sinceindependence for rehabilitating the police in thepopular mind as protetctors of the law. Attitudeformed in the populr mind towards police in the erof our freedom struggle has not yet died but hasproduced a certain ambivalence towards the police.As a result, minvestment in improvement andstrengthening of the police department hasappeared to our leadership as being in some waycontrary to the spirit of democratic welfare.

(7) Rapid Growth of Population

Rapidly growing population is one of the majorimpediments to the development of a traditionalsociety. Rapid population growth usually resultsfrom the improvement in the general conditions ofthe mass, better health-care facility and decline inmorality. A high rate of population growth offsetsthe economic growth of a country. This leads tofrustration, social tension and mass violence.

THE PROCESS OF DEVELOPMENT

What is Under Development?

It is not an easy task to define under-development or an under developed country.According to the “United Nations ExpertsCommittee,” an underdeveloped country is onewhose per capita real income is low whencompared with the per capita real income of theUS, Canada, Australia and Western Europe.According to Prof. Ragnar Nurkse,” the under-developed counries are those which, compared withthe advnaced countries, are underequipped withcapital in relation to their population and naturalresources”. Even this definition is not fullysatisfactory. The Indian Planning Commission hasdefined an under developed country as one “whichis characterised by the co-existence, in greater orlesser degree, of unutilized or underutilised

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manpower on the one hand and of unexploitednatural resources on the other”. According to ColinClark, who was one of the pioneers in the studiesof underdeveloped economies, “economicdevelopment consists in the progressive enlargementof tertiary occupations in the economy”. Accordingto this definition, underdeveloped economies arethose in which the primary occupationspredominate. In current literature, all countries withlow per capita income are genrally classified asunderdeveloped. In genral, all countries with percapita income less than 10% of that of the US(31,910 US dollars) may be regarded asunderdeveloped countries. India, with a per capitaincome of 2,230 US dollars, is one of the mostunderdeveloped countries in the wrold.

Characteristics of Under-Development

Some of the basic common characteristics arediscussed below:

(1) Low Per Capita Income

The per capita income in under-developedcountries is low compared to that of developedcountries. For example, the per capita income ofIndia, Pakistan and many other developingcountries of Asia and Africa is less than 2,500 USdollars, while that of the US and Japan is morethan 25,000 US dollars. Low per capita income issuch an outstanding feature of an under developedeconomy that it can be used as a yardstick tomeasure the level of development of a country.

(2) Deficiency of Capital

The insufficient amount of capital, an importantcharacteristic of all underdeveloped countries, therate of investment is only 5.8% of the nationalincome, while it is 15-18% in the US, Canada andWestern European countries. In an under-developed economy, the low level of per capitaincome limts the size of the market for goods andservices which, in turn, weakens the inducementto invest. The low level of invesment also arises asa result of the lack of dynamic entrepreneurship,which may be regarded as the focal point ofeconomic development. The root of capitaldeficiency is the shortage of savings. The level ofper capita income being quite low in a developingeconomy, most of it is spent in satisfying the barenecessary of life (like food, clothing and shelter),leaving very little for came accumulation.

(3) Excessive Dependence on Agriculture

It is a well-known fact that mostunderdeveloped countries are predinantlyagricultural. A great majority of their population(usually between and 90%) are engaged inagriculture and allied occopations. This excessdependence on agriculture is due to the fact thatnon-agricultural occupation do not grow at a ratecommensurate with the population growth due toof sufficient investments in areas other thanagriculture. The labour to ratio being high in anunderdeveloped economy, agricultural holdingsbecome subdivided into very small plots, which donot permit the use of modern mechanical methodsof production.

(4) Rapid Growth of Population

Although there is a diversity among variousunderdeveloped economies with respect to theirpopulation, they all share a common feature, viz.,a high rate of population growth. This rate hasbeen rising still more in recent years in manyunderdeveloped countries due to advances inmedical sciences, which have greatly reduced childmortality and death due to epidemics. While thedeath rate has fallen phenomenally, the birth ratehas not yet shown significant decline. The commontrend of rapid population growth in under-developed economies is highly important. Its greatrelevance lies in the fact that it frustrates allattempts at development since the increased outputis swallowed up by the incresed population andthe country continues to remain poor. The size ofIndian economy, is the fifth largest in the world(after the US, Russia, China and Germany) fromthe point of view of the Gross Domestic Production(GDP). On the other hand, our population is solarge that if we consider the per capita income,India lies among 10 or 15 poorest countries of theworld.

(5) Large-Scale Unemployment

An important consequence of the high rate ofpopulation growth in an under-developed economywithout a corresponding high rate of economicgrowth is that there is a large-scale unemploymentin urban areas and under-employment in ruralareas. In India, the rate of annual growth ofpopulation is about 17 million. We are not able tocrate even a fraction of 17 million new jobs eachyear with the result that the absolute number ofunemployed (or underemployed) persons goes onincresing every year. It means that more peoplehave to remain engaged in agriculture than needed.It is obvious that the addition of such persons doesnot contribute much to the productivity of the land.

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(6) Under-Utilisation of Resources

Various natural resources in an under-developed economy are either unutilised or under-utilised. Generally under-developed countries arenot deficient in land, water, mineral or forestresources and these natural resources remainmerely potential resources. These countries are notable to utilise their natural resources fully orproperly due to a variety of reasons such as lack ofcapital, lack of proper equipment, inaccessibility tonatural resources, primitive technology, small sizeof market, etc.

(7) Foreign Trade Orientation

It is a common observation that most under-developed economies are foreign-trade oriented.The underdeveloped countries export their rawmaterials to foreign countries instead of utilisingthem at home and import manufactured goodsinstead of making them in the country itself.Excessive dependence on exports makes theeconomies unstable and adversely affectes the termsof trade. The tendency to import manufacturedgoods is also high in such countries.

(8) Low Levels of Skills

The underdeveloped countries employ primitivemethods of production and utilise inferiortechnology. There is also a terrible death o skilledpersonnel. Poor techniques and low levels of skillresult in inefficient and insufficient production,which leads to poverty. The economicbackwardness or poverty of underdevelopedeconomies manifestoes itself in lower efficiency,illiteracy, ignorance and lack of entrepreneurship.

STAGES OF DEVELOPMENT

Prof. Rostrow, an eminent economic historianand a specialist on economic development, hasdivided the historical process of development oreconomic growth into the following five stages:

1. The traditional society.

2. Pre-conditions for take-off

3. The take-off period.

4. The drive to maturity.

5. The age of high mass consumption.

(1) The Traditional Society

In a traditional society, modern science andtechnology are either not available or, even if theyare available, they are not being systematically

applied, though there may be ad hoc applicaionsof innovations. In a traditional society, agriculturalproduction can be increased due to an increase inthe acreage of land under cultivation and thecomposition of domestic and foreign trade may alsochange. But the distinguishing feature of thetraditional society is that there exists a ceiling onthe level of the attainable per capita output. A largeproportion of productive resources in a traditionalsociety is devoted to agriculture.

(2) Pre-conditions for Take-Off

This stage may require a long period, a centuryor even more, during which the pre-conditions fortake-off are established. These conditions mainlyconsist of fundamental chagnes in the social,political and economic fields. Some of the conditionsare:

a) Change of attitude towards science andtechnology, risk taking, earning a profit, etc.

b) Adaptability of the labour force.

c) Political sovereignity.

d) Development of financial institutions.

e) Development of infrastructures such as roads,railways, communications power etc.

(3) The Take-Off Period

This is the crucial stage of development andcovers a relatively brief period of two to threedecades. During the take-off period, the economyof an under developed country transforms itself insuch a way that the subsequent economic growthtakes place more or less automatically. The “take-off period” is defined as the interval during whichthe rate of investment increases in such a way thatthe per capita real output rises significantly. Thisinitial increase in output carries with t the radicalchanges in the techniques of production and thedisposition of income, which perpetuate the newscale of investment and the rising trend in per capitaoutput. The term “take-off” implies three things.In the first place, the proportion of investment inrelation to the national income must rise by 12-15%, thus outstripping the likely growth rate ofpopulation. Secondly, the take-off period must berelatively short, so that it can show thecharacteristics of an economic revolution. Finally,the take-off period must culminate in self-generatingand self-sustaining economic growth.

(4) The Drive to Maturity

This state consists of a long period of self-sstaining and self-propelling economic growth.

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During this stage, the rate of savings andinvestments is of such magnitude that the economicdevelopment occurs almost automatically. As theeconomy matures, the overall capital per headincreases considerably and that, in turn, changesthe structure of the economy itself. The initial keyindustries, which sparked the take-off stage, nowexperience retardation as the law of diminishingreturns comes into play. But a high rate of growthis maintained by a succession of new rapidly-growing sectors. During this stage of development,the proportion of population engaged in agriculturedeclines and, consequently, the structure of thedeveloping country's foreign trade undergoes aradical change.

(5) The Age of High Mass Consumption

During this final stage of economicdevelopment, the per capita real income of thecountry is such that a large number of people canafford to buy the basic needs like food, clothingand shelter. There is a tendency for the leadingsectors to shift towards durable consumer goods.There is also a steep rise in the proportion ofpopulation engaged in tertiary occupations. Thepresent economies of the US, UK, Germany andJapan represent this stage of economic development.India launched her economic developmentprogramme in the form of First Five Year Plan from1951-52. This first two Five year Plans were mainlyconcerned with the preparation for accelerateddevelopment of basic industries, means of transport,facilities for technical training and development ofagriculture. With the Third Five Year Plan, Indiaentered a period of self-sustained economic growth,which has continued in subsequent Five Year Plans.The country has made tremendous progress in manyareas such as atomic energy, space technology, foodproduction, etc. But we are still in the take stage ofeconomic development.

PARAMETERS FOR DEVELOPMENT

Economic Parameters

Economic development, opposite to under-development, implies that a country has a highly

developed economic system. This also meansthat the country has a highly developed bankingand credit systems and an adequate developmentof transport and communication systems. Inaddition to these, widespread social, institutional

and organisational changes are also implied by theprocess of economic development. In other words,development means transformation of apredominantly agricultural economy into a highlyindustrialised one, bringing about a significant risein the national and the per capita income, whichis accompanied by a high rate of capital formationand a high degree of technological development.

The essence of economic development,commonly known as “development”, is the growthof per capita output or per capita income. Theprocess of development is a highly complexphenomenon and it is influenced by a variety ofpolitical, social and cultural forces. As observed byProf. Nurkse, “Economic development has muchto do with human endowments, social attitudes,political conditions and historical accidents. Capitalis a necessary but not a sufficient condition ofprogress”. The supply of natural resources, thegrowth of scientific and technical knowledge andseveral other factors also have a strong bearing onthe process of economic growth. From thestandpoint of economic analysis, the mostimportant factors determining the rateof economicdevelopment are :

a) The Rate of Capital Formation

The crux of the problem of economicdevelopment in an under-developed economy liesin the rapid expansion of its capital investments.This is necessary so that the rate of the growth ofoutput exceeds the rate of the growth of outputexceeds the rate of population growth. Only withsuch a high rate of capital investment will thestandard of living begin to rise in an under-developed country. No economic development ispossible without irrigation systems, production ofagricultural tools and implements, land reclamationand construction of dams, bridges, factories, roads,railways, airports, ships and harbours. All theseare the “produced means of further production”,associated with high levels of productivity.

b) Capital-Output Ratio

Apart from the ratio of capital formation to theaggregate national income, the growth of outputalso depends on the capital-output ratio. This ratiodetermines the rate at which the output of acountry grows as a result of a given volume of thecapital investment. A lower capital-output ratioleads to a comparatively higher rate of the growthof output as a result of a given volume of capitalinvestment. It is difficult to estimate the capital-

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output ratio for a given economy. The reason isthat the productivity of capital depends upon manyfacors like the degree of technological developmentassociated with capital investment, efficiency ofhandling new types of equipment, quality ofavailable managerial and organisational skills andpattern of capital invstments.

c) The Rate of Population Growth

For effecting a significant improvement in thestandard of living, the rate of capital formationand the consequent rate of the growth of outputmust be seen in relation to the rate of populationgrowth. The rate of population growth is given bythe difference between the birth rate and deathrate of a country. In an underdeveloped economy,the population may be growing so fast that it mayoff-set even a relatively higher rate of capitalformation and the resulting increase in the output.The population of a country can be both a helpfuland a retarding factor in economic development. Itdepends on the size of the population is just enoughto utilise these resources fully and efficiently, itcontributes greatly to the development of thecountry concerned. On the other hand, if the sizeof the population is too large or too small in relationto natural and capital resources, it becomes anobstacle to economic growth. If the population ofa country is too large, it contains a higherproportion of dependent population. A largedependent population implies a high expenditureon consumption and, therefore, low savings andinvestments. Since it is the responsibility of thegovernment to provide the basic necessities of lifeto the citizens, a relatively higher populationinvolves a higher expenditure to provide suchnecessities

Non-Economic Parameters

The non-economic parameters provide as muchmotivation for economic development as theeconomic parameters. In fact, the difference in thegrowth rates of the developed and developingcountries can be explained mainly on the basis ofnon-economic parameters like political soverrigntyof the country, the type of government, TheGovernment of India has put its faith in democraticplanning for development. Equally important forthe process of development are social and culturalfactors. Each society has certain social institutionswhich have a strong bearing on economic growth.In India, the social institutions of caste, joint familysystem and the non-materialistic attituce of the

people have proved to be some of the seriousimpediments to rapid development in India mustaim at removing or at least weakening these age-old social institutions and bringing in about afundamental change in the attitues of the people.Likewise, rampant illiteracy among the people inmost of the developing countries is another exampleof social and cultural factors which hindereconomic economic development. A more detaileddiscussion on some of the important non-economicparameters for development is given below:

a) The Quality of Human Resources

In the past, economists used to talk of labour asif it was a well understood uniform input into theprocess of production. Now it has been realized,that the typical adult worker is not just a basicfactor of prodution, but a mixture of labour and agreat deal of the so-called embodied capital. Thus,the output per head and a great deal of the so-called embodied capital. Thus, the output per headcan be increased by increasing the quantity of thecapital invested in a typical worker and improvingthe quality of labour.

All serious studies in industrial productivitypoint to the fact that advnaced technical trainingpays not only the individual worker (or manager)who gets the training but also the society as asociety as a whole since it increases the per capitaoutput. In addition to increased output, there areother general advantages derived by the societyfrom an educated populatopm. Various studieshave shown that productivity improves withliteracy and, in general, the longer the period ofeducation a person has, the more adaptable he isto new challenges in this fast-changing wrold.

b) The Quantity of Labour

It is obvious that, four any given state oftechnical knowledge and the supply of other factorsof production like machinery and raw materials,the size of the population can affect the level ofper capita output. Every child born represents botha mouth to feed and a pair of hands to work. It isperfectly possible to speak of over-populatedeconomies, depending on whether the contributionof additional people to production would lower orraise the level of per capita income of the nationconcerned.

c) Invention and Innovation

New knowledge and inventions can significantlycontribute to the economic development of a nation.

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In order to see this, let us assume that the proportionof the nation's resources devoted to the productionof capital goods is just sufficient to replace thecapital stock as and when it wears out. Now if theold capital goods were merely replaced in the sameform, the capital stock would remain constant andthere would be no increase in the national income.On the other hand, if there is a growth ofknowledge, the old worn-out equipment would bereplaced by different and more productiveequipment. In this case, the national income willhave to grow because of the growth of knowledgerather than the accumulation of more and morecapital. This sort of increase in the national incomecan come about either by generating knowledgeinternally through research and developmentactivities or by importing it from abroad throughtechnical collaboration with multi-nationalcompanies. To some extent, developing countriescan adapt the techniques that are already developedand used elsewhere. Developed countries, on theother hand, have the more difficult task ofdeveloping new techniques by research, inventionand innovation. The historical importance ofinvention and innovation in contributing toeconomic growth is so well-established that it hardlyneeds any elaboration. The assembly line andautomation are radically transforming the meansof production. Similarly, te invention of aeroplanehas revolutionised transportation and electronicdevices have come to deminate the communicationindustries. These innovations plus the less well-known but no less profound ones have createdmany new opportunities for investment andcreation of wealth. The nature of goods and servicesconsumed and the techniques employed toproduced them are continually changing throughresearch, development and innovation.

d) Social and Legal Institutions

Social habits of a country have a significanteffect on its economic growth. Certain religiouspatterns are said to be conductive to economicgrowth.

The well-known sociologist Max Weber arguedthat the Protestant ethic encouraged the acquisitionof wealth and was thus more likely to encourageeconomic sphere. Although this hypothesis is notyet well-established, economists are interested insuch relationships. On the other hand, if certainreligious patterns or social habits tend to makeeconomic growth more difficult, one cannotconclude that the religious and social structures

should be changed to maximize the possibility ofeconomic growth. In addition to religious and socialinstitutions, the legal institutions of a country mayalso affect its economic growth. The pattern ofownership of land and natural resources naturallyaffect the way such resources are used which, inturn, affect their productivity. If agricultural landis divided into very small plots with each ruralfamily having one such plot, it would be difficultto achieve the advantages of modern agriculturaltechniques. On the other hand, the concentrationof land ownership in the hands of a few absenteeland-owners, who are not much concerned tomaximise their profits, may also be detrimental toeconomic growth. If the land lord's holdings are solarge that he can obtain all the income he desireswihtout using his land effectively, he may havelittle incentive to introduce advanced techniques.In many countries where this system (i.e. absenteeland lords owning land) exists, land reform (whichusually implies the confiscation, nationalization orcommunisation of land) becomes a necessarycondition for growth.

e) The Role of International Trade

International trade plays a very important rolein economic development since it allows a countryto escape from its own limitations of natural andhuman resources and concentrates its efforts in theareas in which it has a genuine advantage. If therewere no international trades, a developing countrywould have to grow on all fronts simultaneously.In that case, its growth could be seriously impairedby the limitations of natural resources and acquiredhuman skills in many areas. A country bent ongrowing through an industrialisation policy maybenefit if it can concentrate at first on lightmanufacturing and exporting consumer goods inreturn for capital goods made by heavy industriesin more developed countries. In this way, adeveloping country can gain many of the benefitsof more efficient production that it could not hopeto match for a long time to come.

Among the other advantages of specialisationsthat international trade makes possible are theopportunities to take advantage of the economy ofscale by producing far more goods than would berequired to meet the domestic demand in a state ofself-sufficiency. A further advantage that may besignificant for a developing country is often calledthe advantage of “learning by doing”. On the otherhad, economic growth with a heavy dependenceon the foreign trade often brings in the dependence

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on the foreign trade often brings in the seriousproblem of the balance of payments in a world offixed exchange rates. In a developing country,capital goods are often one of the main limitationsto growth. In a closed economy, the problem ofscarce capital appears as a resource problem sincethere are not enough resources to produce capitalgoods at a rate as fast as desired. In an openeconomy the same problem appears as a foreignexchange problem since there is not enough foreignexchange to buy all the imported capital goods thatare desired for faster economic growth. In bothcases, the problem is the same, I.e,, it is very difficultto obtain a desied level of capital goods. One wayis to make the capital goods at home; the otherway is to make consumer goods at home and thensell them abroad in exchange for capital goods. Asecond problem in a developing country is relatedto the import of consumer goods, if the country'seconomy is an open one. AS the country'sproductivity rises, disposable income and thestandard of living also rise. In many developingcountries, the goods produced at home are mainlyin the necessity class with low margins of profit,whereas imported goods tend to have a higherprofit margin. In such a situation, the rise in incomethat accompanies economic growth brings with ita shift in the pattern of consumer demand, with alarger proportion of consumers opting for thepurchase of imported goods. Unless somethinghappens to offset this shift in consumer demand,economic growth can be accompanied by anincreasingly severe problem of the balance ofpayments. This problem can be offset in two ways.The first way is for the country to develop exportcommodities with rapidly expanding demand forthe country to develop export commodities withrapidly expanding demand for them in foreigncountries. In this case, the exports can expandrapidly to match the increasing imports. A secondway is for its domestic growth to take place partlyin the so-called “import-substitute” industries.Growth of industries that complete with importscan keep the rapidly expanding demand for luxurygoods from being translated into an equally rapidlydemand for their imports.

THE ROLE OF NGOS AND CIVILSOCIETY IN DEVELOPMENT AND

POVERTY REDUCTION

Civil society is the arena, separate from stateand market, in which ideological hegemony is

contested across a range of organisations andideologies which challenge and uphold the existingorder. To the extent that individuals cannotaccomplish certain tasks alone, they typically fallto voluntary associations or civil societyorganisations, which exist to change or challengethe existing structures and processes underlyingexclusion or disadvantage. While in mainstreamdevelopment usage, civil space is often viewed as“an unqualified good”, it represents all interestsand contains many competing ideas and intereststhat may not all be good for development.

Civil society is a broad and hazy concept, andif we see diversity in the NGO sector, we see evengreater diversity within it, covering all non-state,non-market, non-household organisations andinstitutions, ranging from community or grassrootsassociations, social movements, cooperatives labourunions, professional groups, advocacy anddevelopment NGOs, formal non-profits, socialenterprises, and many more. In recent decades,‘old’ social movements of trade unions and labourhave been joined by movements focusing on issuessuch as gender, environment and a wide diversityof other citizen interests. Context, therefore, is keyto civil society and must be key to any analysis andunderstanding of it.

Across the developing world, states with limitedfinances and riddled by poor governance andcorruption have failed to lead to development forall of their citizens. Within this context, alternativeforms of development have been pursued, and sincethe 1980s, nongovernmental organisations (NGOs)have been increasingly advocated as a meansthrough which the gulf between citizens’ needs andexisting services can be bridged. Where states cannotprovide sufficient goods, services or enablingenvironments that help citizens in securinglivelihoods, or where disadvantaged groups areexcluded from existing state institutions, alternativechannels of service provision and/or holdinggovernments to account must be found. It is intothis gap that NGOs have neatly fitted.

NGOs

The emergence and expansion of NGOs indevelopment-

It was perceived failures of state-leddevelopment approaches throughout the 1970s and1980s that fuelled interest in NGOs as adevelopment alternative, offering innovative and

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people-centered approaches to service delivery,advocacy and empowerment. While NGOs andtheir position within the development sector haverisen dramatically, the taxonomy of NGOs remainsproblematic. Emerging from long-term traditionsof philanthropy and self-help, NGOs vary widelyin origin and levels of formality. While terms suchas ‘NGOs’ and ‘third sector’ are classificatorydevices that help understand a diverse set oforganisations, they can also be obscure in presumingthe institutionalized status of NGOs, for example,one potentially ignores a large number ofunregistered organisations seeking to further thepublic good.

The rising prominence of NGOs:

Until late 1970s: A limited number of smallNGOs receiving little external support constitutedthe NGO sector. Most were northern-based with asouthern presence, often based on religiousassistance and/or in short-term relief.

Late 1970s to 1980s: ‘The NGO decade’ takesplace amidst the Western pursuit of neoliberalagendas, with NGOs emerging as a promisingdevelopment alternative.

Late 1990s: Alongside emergence of the goodgovernance agenda, the first concerns surroundingNGOs take off alongside a focus back on the roleof the state.

2000s: A new international aid regime promisesgreater consultation and focus on non-growthfactors. NGOs with their people-centered, rights-based, and grassroots-driven approaches are well-suited to continue riding the NGO wave.

2010s: With persistent concerns of NGOsremaining unaddressed and recognition of theirlimited success in advocacy and empowerment,there is increasing recognition that NGOs are onlyone sector within broader civil society and theymust reorient themselves with their grassroots-roots.

(a) NGOs as the ‘Development Alternative’:Service Providers and Advocates for the Poor-

Two distinct roles for NGOs are highlighted,both as service providers and advocates for thepoor. The service provider–advocate dividedifferentiates between the pursuit of ‘Big-D’ and‘little-d’ development. ‘Big-D’ development sees‘Development’ as a project-based and intentionalactivity, in which tangible project outputs have littleintention to make foundational changes that

challenge society’s institutional arrangements. Incontrast, ‘little-d’ ‘development’ regardsdevelopment as an ongoing process, emphasizingradical, systemic alternatives that seek differentways of organizing the economy, socialrelationships and politics. In their role as serviceproviders, NGOs offer a broad spectrum of servicesacross multiple fields, ranging from livelihoodinterventions and health and education service tomore specific areas, such as emergency response,democracy building, conflict resolution, humanrights, finance, environmental management, andpolicy analysis. Ninety percent of registered NGOsin Kenya, for example, are involved primarily inservice delivery. In the process, NGOs and theiractivities have become professionalized anddepoliticized.

The role and contributions of NGOs in advocacyand empowerment is difficult to define, but wecan look at their efforts along a broad spectrum.At one end are those NGOs actively intervening indemocracy-building and transforming state–societalrelations such as those emerging to mobilize andsupport radical social movements in the early ‘NGOdecade’ in Latin America. NGOs are vastlyconstrained in this sphere, seeking instead toconvince governments that they are non-political.Instead, at the other end of the spectrum, mostNGOs seek ‘empowerment’ as an indirect outcomeof their wider service delivery activities. People-centered and participatory approaches to servicedelivery are suggested in this approach to lead tolocal-level capacity building in the long run,fostering a stronger democratic culture in whichchanges are hypothesized to feed into local andnational institutions and processes.

(b) Grassroots Orientation: SupportingCommunity-level Initiative through Mobilization,Networking, and Federation-

The major task of NGOs is to serve as anintermediary to accelerate the pace of the creationof self-governing grassroots organisations (GROs),provide them with assistance as they expand, andfoster links between them. A rapid expansion inthe numbers and capacities of such groups wasseen as permitting not merely an increase in theirdevelopment ‘projects’, but a much greater impacton state policies and on local, regional, and nationalpolitical processes. It is commonly viewed thatNGOs provide more effective targeted aid, giventheir closer proximity to the poor, and that theiroperations should not be subject to distortions bycommercial or political interests. With their

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participatory and bottom-up developmentapproach, they are differentiated by the fact thattheir programmes should reflect local contexts,needs and realities.

(c) Innovation:

Alongside their participatory roots, the abilityof NGOs to be innovative and experimental aresaid to underlie the secrets of NGO effectiveness.Alongside the external determination of localagendas, a number of internal and external factorsconstrain the innovativeness of NGO activities,which instead fall into a ‘predictable range’ ofactivities, varying little by region, country orcontinent.

(d) Expert Advice and Analysis- IntellectualCompetition to Governments:

NGOs can facilitate negotiations by givingpoliticians access to competing ideas from outsidethe normal bureaucratic channels; NGOs oftenhave much better analytical and technical skills andcapacity to respond more quickly than governmentofficials;

(e) Mobilization of Public Opinion andRepresentation of the Voiceless:

NGOs can influence the public throughcampaigns and broad outreach; NGOs can helpvocalize the interests of persons not well-represented in policymaking;

(f) Monitoring and Assessment- Legitimizationof Decision Making Mechanisms-

NGOs can help strengthen inter-nationalagreements by monitoring negotiation efforts andgovernmental compliance; NGOs could broaden thebase of information for decision making, improvingthe quality, authoritativeness, and legitimacy of thepolicy choices of international organizations

Criticisms of NGOs:

1. There has been criticism on how NGOs haveused their funding and other monies received orraised. Criticisms range from pointing out that onlysmall percentages go to people in need, that a lotgoes to recover costs, and some have even beenused to pay very high salaries of the people at thetop of these organizations.

2. They are seen as vehicles for privatizing foreignassistance, making it less accountable to eithergovernment authorities or local people because of a lackof clear governance structures for NGOs.

3. Another type of criticism for some NGOs isthat despite good intentions, they may be doingmore harm than good, without realizing it. Forexample, many food aid groups where, in non-emergency situations, food is delivered from richcountries for either free, or virtually free, end upunder-cutting local producers and hence have anegative effect on local farmers and the economy.

4. Criticism of NGOs also comes from anotherquarter: corporate-related interests. Because thereare a number of development and social-justiceoriented NGOs that criticize excesses of concentratedand corporate capitalism, and because some of thesecriticisms are slowly spreading, corporate fundedresearch and think tanks are hitting back. Criticismhas typically come in the form of questioning the“undemocratic” nature of NGOs, because thepeople didn’t choose them, yet they claim to befighting for various issues for the people.

5. NGOs are working with the Governmentwithout having any coordination among them. Itoften creates duplication of activities and wastageof money.

SELF HELP GROUP (SHGs):

Self-help group is a method of organizing thepoor people and the marginalized to come togetherto solve their individual problem. A self-help group(SHG) is a village-based financial intermediaryusually composed of 10–20 local women. Most self-help groups are located in India, though SHGs canalso be found in other countries, especially in SouthAsia and Southeast Asia.

Self-help groups are started by non-governmental organizations (NGOs) that generallyhave broad anti-poverty agendas. Self-help groupsare seen as instruments for a variety of goals,including empowering women, developingleadership abilities among poor people, increasingschool enrollments, and improving nutrition andthe use of birth control. Financial intermediation isgenerally seen more as an entry point to these othergoals, rather than as a primary objective. This canhinder their development as sources of villagecapital, as well as their efforts to aggregate locallycontrolled pools of capital through federation, aswas historically accomplished by credit unions.

Members make small regular savingscontributions over a few months until there isenough capital in the group to begin lending. Fundsmay then be lent back to the members or to othersin the village for any purpose. In India, many SHGs

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are 'linked' to banks for the delivery of microcreditThe SHG method is used by the government, NGOsand others worldwide. The poor collect their savingsand save it in banks. In return they receive easyaccess to loans with a small rate of interest to starttheir micro unit enterprise. Thousands of the poorand the marginalized population in India arebuilding their lives, their families and their societythrough Self help groups. The 9th five year plan ofthe government of India had given due recognitionon the importance and the relevance of the Self-help group method to implement developmentalschemes at the grassroots level.

NABARD's 'SHG Bank Linkage' programme:Many self-help groups, especially in India, underNABARD's SHG-bank-linkage program, borrowfrom banks once they have accumulated a base oftheir own capital and have established a trackrecord of regular repayments. Self Help Group(SHGs)-Bank Linkage Programme is emerging as acost effective mechanism for providing financialservices to the “Unreached Poor” which has beensuccessful not only in meeting financial needs ofthe rural poor women but also strengthen collectiveself help capacities of the poor, leading to theirempowerment.

The Concept of SHG is based on the followingPrinciples:� Self-help supplemented with mutual help can

be a powerful vehicle for the poor in theirsocioeconomic development;

� Participative financial services management ismore responsive and efficient;

� Poor need not only credit support, but alsosavings and other services;

� Poor can save and are bankable and SHGs asclients, result in wider outreach, lowertransaction cost and much lower risk costs forthe banks;

� Creation of a common fund by contributingsmall savings on a regular basis;

� Flexible democratic system of working;� Loaning is done mainly on trust with a bare

documentation and without any security;� Amounts loaned are small, frequent and for

short duration;� Defaults are rare mainly due to group pressure;

and� Periodic meetings on non-traditional savings.

Why Self-Help Group Is Important?

� To alleviate poverty� To increase employment opportunity

� To accelerate economic growth� To raise status in society is the prime reason

for respondents joining the SHG� To promote income generating activities

Role and Impact of Self-Help Groups:

a. Saving and Financial Decision Making- Oneof the primary benefits of participation in a SHG isthe opportunity to save regularly, access formalsavings institutions and participate in themanagement of these savings. They save regularly,have their own bank accounts and make depositsinto these accounts. SHGs have a good impact onmembers, in their ability to save their hard earnedmoney.

b. Access to credit- A corollary of participationin SHGs is an improvement in a woman’s access tocredit. The financial mobility due to participationin the SHG led to an improvement in the quality oflife, and financial inclusion, according to some ofthe successful groups.

c. Employment- The implementation of SHGsin various parts of the country helps in generatingSelf-employment opportunities for the rural poor.

d. Decision making within the household- Thesocial impact of the SHG has increased involvementin Decision-making, awareness about variousprogrammes and organisations, increased access tosuch organisations, increased expenditure on Healthand Marriage events, there is a Change in theattitude of male members of the families, now theyare convinced about the concept of SHG andencourage women to participate in the meetingsand women reported that they have savings in theirname and it gives them confidence and increasedself respect.

e. Participation in local government- Becauseof SHG, women know about their local politicalinstitutions such as the Gram Panchayats and havebetter knowledge of where to report certain typesof grievances. As part of the political empowermentprocess, it is a pertinent fact that many womenhave not only been elected to the Gram Panchayatsbut have become the role holders too.

f. Self Confidence among Members- The groupformation has brought out the hidden talent andleadership qualities among the members. Therefore,it can be concluded that after joining the SHG themembers have improved their status in family,become helpful in family finance and sometimeshelped others too.

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g. Change in Family disputes / Violence-Involvement with SHGs can reduce violence invarious cases, especially due to reduction ineconomic difficulties.

h. Community Participation- SHGs encouragescommunity participation in various areas such aseducation, environment, etc.

Role of Donors, Charities, Institutional andother Stakeholders, Various Groups andAssociations:

Charity is defined as giving voluntarily to thosein need. It covers the giving of both money, and ofthe self through service to the needy. The term isalso used to denote an institution or organization,which helps those in need. Though the roots ofcharity are to be found in religious belief andpractice, charitable trusts and voluntaryorganizations are its secular and institutionalmanifestation.

Those who desire to work together for socialreforms or to provide service to the poor and needycan form associations or societies for the purpose.Religious organizations, especially Christianmissions, took up work to help the poor to improvetheir conditions. This was the genesis of what cameto be referred to as voluntary organizations. Withthe freedom struggle and Gandhiji’s advocacy ofvoluntary constructive work to improve the lot ofthe masses, many more voluntary organizationswere formed.

Those who were unable to serve society directly,but were able to provide money and other materialresources, either established charitable institutionslike dharamshalas, schools, orphanages, women’s

homes and the like, and donated funds to run them,or established endowments to provide monetaryhelp in perpetuity to some charitable cause.

After Independence the numbers of voluntaryorganizations expanded to meet nationaldevelopment goals, especially when it becameapparent that the governmental programmes wereinadequate to respond to the development needsof the deprived sections of the society.

The definition of charity brought within itsambit a very wide range of organizations workingfor both welfare and development, and not onlythose working for relief of distress.

Collectively all such organizations are todayreferred to as the nonprofit sector, (NPO sector)which has grown almost exponentially over thelast few decades. Today the non-profit sectorcomprises organizations that

� Donate money for charitable causes, (trusts andfoundations);

� Charities for the welfare of the poor and theneedy, (charitable organizations);

� Organizations that are development oriented,(NGOs);

� Organizations engaged in advocacy, protectionof human rights, research and resource centres,environmental conservation et al.,(intermediarysupport organizations, umbrella groups,networks, ) and,

� Associations of all kinds, including Chambers,Associations of lawyers and charteredaccountants, which are not for public benefitbut are mutual benefit organizations, thoughnonprofit making.

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