MCom I Semester Business Environment Regional Imbalance Study material Notes

MCom I Semester Business Environment Regional Imbalance Study material Notes: Meaning of Regional Imbalance Causes for Regional Imbalance Suggestions for Imbalanced Growth Effects of Imbalanced Regional development Indicators of Regional Imbalance Efforts made to remove Regional Imbalance Measures for Alleviation of regional Imbalance Long Answer Questions Short Answer Questions Objectives :

CTET Paper Level 2 Language I English Question Model Paper

REGIONAL IMBALANCE

There are various sectors of an economy, viz., agriculture, industrial sector, mines, social services sector, etc. The co-existence of relatively developed and economically depressed states and uneven reigons within each state is known as regional imbalance. Regional imbalance implies that there is difference in ‘economic development of different regions.

In developing countries, the developed regions are generally confined to urban centres and urban areas. This is mainly because physical geography controls growth in a great degree in developing countries than in developed countries. Climate too plays an important role in the low economic development of many regions in India as reflected in low agricultural output and absence of largescale industry. It is not possible that all the regions of a country should be equally developed. For example, development of agriculture is possible only in those regions where soil is fertile and water resources are in plenty. For the development of industries availability of raw materials and cheap laboures is necessary. Most of the area development measures are specially meant to help drought-prone areas or hilly areas or those inhabited by scheduled tribes. Our Himalayan states, viz, Northern Kashmir, Himachal Pradesh, Uttarakhand have remained backward and underdeveloped because of inaccessibility.

Regional Imbalance Study material

CAUSES FOR REGIONAL IMBALANCE

The causes for regional imbalance may be classified into four groups(1) Economic causes; (2) Natural causes; (3) Political causes, and (4) Social causes.

 Economic Reasons

2. Facilities for capital receipt : Distribution of income is not equal in all

regions of a country. As a result their capacity to save and investment opportunities are not equal. Furthermore, the institutions providing financial assistance are not equally established in various regions. In the area where the banking facilities and financial investment is easily available, these regions are more developed. Operations of term lending institutions and banks have created imbalances.

2. Availability of entrepreneurs : In an economy the entrepreneurship is the most promising factor which promotes economic development. In the regions where entrepreneures are ready to bear the risk, those areas are more developed.

3. Saving and Investment pattern : Pattern of saving and investment also plays an important role in the economic development. In the regions in which propensity to save and invest is high, the rate of capital formation is also very high. In contrast the areas in which tendency of saving and investment is low, they are less productive areas and create imbalance.

4. Export possibilities : The areas which are more suitable for the production of exportable goods, those areas are more developed.

5. Availability of labour : Availability of efficient labour is essential for the economic development of a country. In the region in which facilities of education, training and technical knowledge is available, supply of good, efficient and expert labourers increases and that region develops.

6. Public Investment Policy: Public investment policy is also responsible for regional imbalance. If the government favours the forward states in terms of approval of investment proposals, the already better-off states can further accelarate the growth process while the backward regions being unfavourably treated face a retardation in growth.

7. Means of transportation : Transportation system helps to broaden the market for goods and by doing so, it makes possible large-scale production through division of labour. Transport development helps to open up remote regions and resources for production. By linking the backward regions with the relative more advanced, transport development helps in the better and fuller utilisation of resources. Expansion of transportation facilities helps industrialisation directly. In the regions where transportation system is good those regions will develop.

8. Mobility of means : Mobility of means of production is confined to a particular region. Due to availabity of means of production some regions are getting a special favour in respect of settlement of some development programmes whereas due to non-availability of means of production some regions of the country remain backward.

9. Trend of consumption: If the consumers of a particular region consume only traditional goods and do not include new and advanced goods in their consumption, the area becomes backward because entrepreneurs and producers will not take risk and will not produce new and sophisticated goods.

Natural Reasons

1 Suitable Climate : Some regions are more suitable to set up particular kinds of industries. For example, climate of western India is suitable for textile industries. Thus, climate also determines regional development.

2. Fertile Soil : In the regions where cultivating land is fertile, agriculture production is in plenty. Regional imbalances arise due to fertility of land which accrue to some regions and not to some other regions.

3. Availability of means of power : The most important single factor which can act as a constraint on economic growth of a country is the availability of means of power. The sources of power are coal, petroleum, electricity, hydroelectric power, atomic power etc. The regions in which such powers are available in plenty, those regions are developed.

4. Availability of raw materials: Some regions are preferred because of certain location advantages. The location of iron and steel factories or oil refineries will have to be only in those technically defined areas which are optimal from all the stand points. As the process of development gains momentum, they attract labour.capital, trade and the external economies offered by the developing regions.

Regional Imbalance Study material

III Political Reasons

1 Relief given by Government: Some state governments offer incentives to attract investors to the backward regions. These incentives include provision of developed plots with power and water on a no-profit no loss basis, interest free loans, exemption from octroi duty, exemption from payment of property tax for some years, subsidy on industrial housing scheme. etc.

2. Political stability : Political instability in the form of instable government, law and order etc. have been obstructing the flow of investment into these backward regions besides making flight of capital from these backward states. Whereas the political stability and stable government attract more capital and open the path of development in those regions.

Social Reasons

1 Elementary Facilities: By and large better levels of Net state Domestic products are associated with higher level of human development. To achieve higher levels of human development, it is necessary that investment in educational and health infrastructure be stepped up.

2. Casteism : The people of some states do not accept those jobs which are not accepted in their caste. Because of these reasons some states remain undeveloped.

SUGGESTIONS FOR IMBALANCED GROWTH

Balanced development of all regions and all states in a country is necessary to draw the available human and material resources through out the country into the development process and to enable people in all regions to share the benefits of development. Concessional finance and subsidy were significant motivating factors in pursuading entrepreneurs to locate their units in backward areas, following measures are suggested to remove regional disparities.

(1) Public undertakings should be developed and established in backward states and regions.

(2) Funds should be specially alloted to local authorities to expedite the development of backward areas.

(3) Industries located in backward areas should be granted higher development rebate.

(4) The bulk of private and public investment should flow in providing infrastructure facilities to backward regions so that they may generate new employment and income streams for the poor. The facilities like transport, communication, power and electricity should be rapidly developed.

(5) Foreign companies should be induced to develop the backward regions.

(6) The educative programmes for the awakening of people in backward areas should be introduced.

(7) A balanced multi-level planning system should emerge which should operate at the state/block and district levels with some differences the structure and methodology of planning every level must have common features. Multilevel planning facilitates people’s participation in the decision making.

(8) The programmes launched by the centre and the state governments should be made more extensive.

Regional Imbalance Study material

EFFECTS OF IMBALANCED REGIONAL DEVELOPMENT

 (i) Human development : Among the backward states, Uttar Pradesh Bihar, Rajasthan and Madhya Pradesh have very poor record in terms of literacy especially female literacy. They have also failed to make adequate investment in health infrastructure and consequently have lower life expectancy, higher infant mortality and high birth rate.

(ii) Irrigation facilities : Besides the production of foodgrains, the percentage of irrigated area on gross cropped land also indicates the development of agriculture in the state. Punjab, Haryana, Tamil Nadu cover the maximum irrigated area. Madhya Pradesh, Karnataka, Odisha, Rajasthan, Maharashtra are less developed in this respect.

(iii) Electricity : This indicates level of energy consumption in different states. Punjab has shown maximum per capita consumption of power which is an indicator of high level of economic activity in Punjab. Assam, Uttar pradesh and Bihar have shown the figures below the national average of 338 kwh. It is imperative that unless the industrialisation processes pick-up in these states, the disparities would continue

(iv) Transport facility: Statewise number of registered vehicles per 1000 persons is an important indicator, though it can not be treated as a comprehensive indicator of the level of transport development, since it does not take into account railways and road length per 100 sq kms, which have become a major mode of transport. While creation of infrastructure is important, but the intensity of its use would depend upon the state of development in the state. For example, Odisha has 134.8 km of road length per 100 sq kms of area but it ranks very low in terms of NSDP. This explains the under utilisation of roads. Punjab, W. Bengal, Gujarat etc. are well endowed with transportation facilities while regions like Madhya Pradesh, Karnataka, Odisha, Assam, Jammu and Kashmir are more deficient in the same. North East and Jammu & Kashmir have not been linked with the rest of country and as a result, they have remaimed physically and emotionally isolated.

(3) Per capita net domestic product: In terms of per capita state net domestic product Bihar, Odisha, Uttar Pradesh, Assam, Madhya Pradesh and Rajasthan are far behind Punjab, Maharashtra, Haryana and Gujarat. Tamil Nandu, Kerala, Karnataka, West Bengal and Andra Pradesh are middle income states. In the richer group there are four states, viz. Punjab, Haryana, Maharashtra and Gujarat. In these states annual growth rates were much higher than poor states. Thus over the time period, disparities between the richer and poor states have increased. Haryana occupied the first position in 2013-14 with its per capita income placed at 1,32,089. The second position was occupied by Maharashtra with a per capita income of 1,14,392. Tamil Nadu was a close third with its per capita income being * 1,12,664 in 2013-14.

Regional Imbalance Study material

EFFORTS MADE TO REMOVE REGIONAL IMBALANCE

Because of the glaring regional disparities in India, the planners have accepted the importance of balanced regional development ever since the initiation of the planning process in India.

(1) First Five Year Plan (1951-56):

(i) Plan of electricity generation by multipurpose projects. (ii) Extenstion of existing industrial units.

In the first plan it was mentioned that rate of pattern of development would take due consideration of regional balance and sustained growth. But due to limitation of resources no deliberate effort was made to correct regional disnarities

 (2) Second Five Year Plan (1956-61): The Second Plan clearly admitted that, “in any comprehensive plan of development, it is axiomatic that the special needs of the less developed areas should receive due attention. The pattern of investment must be so devised as to lead to balanced regional development. Following efforts have been made :

(1) Emphasis on the localisation of new industries.

(ii) Development of infrastructural facilities, viz., transport, communication, power, education etc.

(iii) To encourage the mobility of labours in various regions.

(iv) Introduction of development programmes for small, cottage and rural industries.

(3) Third Five Year Plan (1961-66): The Plan emphasised that,”balanced development of different parts of the country, extension of the benefits of economic progress to less developed regions and widespread diffusions of industry are among the major aims of planned development.”

The Third Plan aimed to – (a) help the states in reducing intra-state disparities; and (b) initiating new programmes and extend programmes adopted in the previous plans to reduce inter-state disparities.

As fas as the first issue is concerned, programmes included related to:

(a) increasing agricultural production.

(b) increse in income and employment.

(c) developing social services, especially elementary education, water supply and sanitation and health services in rural areas.

(d) developing communications and power.

(e) raising the standard of living in less developed areas of the state. As far as second issue is concerned, programmes included:

(a) intensive development of agriculture and irrigation;

(b) promotion of small and village industries;

(c) expansion of power, development of rail and road transport;

(d) provision of universal education;

(e) programmes for welfare of scheduled castes, scheduled tribes and other backward classes.

(f) establishment of large industrial projects and river valley projects in the less developed areas of the country so long as they did not seriously conflict with the technological considerations.

(4) Fourth Five Year Plan (1969-74): The policies adopted in the Third Plan continued in the subsequent plans. The Fourth Plan introduced a number of other schemes for the benefit of the rural people such as Small Farmers’ Development Agency (SFDA), Marginal Farmers’ and Agricultural Labourers’ Development Agency (MFAL), Drought Prone Area Programme (DPAP), Crash Scheme for Rural Employment (CSRE), Pilot Intensive Rural Employment Projects (PIREP).

Other specific programmes included in the Fourth Plan were concerned with the identification of backward regions for purpose of granting concessions and assistance to industries established in such areas.

Besides a number of state governments and financial institutions also announced special concessions to industries established in the backward areas so that entrepreneurs could be attracted to invest in such areas.

(5) Fifth Five Year Plan (1974-79): The Fifth Plan planned for rapid economic development of backward areas.

(i) To provide state financial assistance and subsidies to the backward and hilly areas.

(ii) rapid development of these areas by providing financial assistance.

(iii) To promote private investment in selected backward regions.

(iv) To provide institutional finance on the basis of priority.

In Fifth Plan emphasis was laid down on Area Development. Approaches adopted for this purpose included the resource-based or the problem-based development approach, the target group approach, the incentive approach and the comprehensive area approach.

(6) Sixth Five Year Plan(1980-85): To provide an integrated approach to the problems of regional inequalities, the Sixth Plan adopted the mechanism of area planning and the sub-plan approach was promoted so that the area plans could be integrated fully with the national development plan. The Plan emphasised the need for continuing existing policies for removing regional disparities. In addition, the Plan recommended :

(i) Diffusion of skills and technology to backward areas so as to increase productivity;

(ii) Strengthening of the weak resource base of such areas by specific programmes for their development;

(iii) Such areas special programmes would be detailed with the over-all development plan of the state in order to make them cost effective;

(iv) The recommendations of the National Committee on Development of Backward Areas (NCDBA) were to be considered, modified and introduced.

(7) Seventh Five Year Plan (1985-90): The Seventh Plan gave top priority to balanced regional development. Many programmes and schemes were introduced for development of backward areas. The main policies of the plan were as follows:

(i) The plan relied on increases in agricultural productivity particularly rice, coarse cereals, pulses and oilseeds in eastern region and in dry land rainfed areas throughout the country to raise agricultural income.

(ii) Shift in agricultural strategy along with area development programmes for drought prone, desert, hill and tribal areas;

(iii) The plan envisaged a major programme in human resource development through primary health care, universalisation of elementary education and the elimination of illiteracy amongst young adults.

(iv) Greater emphasis on programmes for fulfillment of minimum needs like water supply, rural roads and rural electrification.

The Planning Commission anticipated that a substantial improvement in human resources in backward regions would help in the reduction of regional disparities.

(8) Eighth Plan (1992-97): The role of economic planning was redefined by the government under the Eighth Plan. The Plan provided for some special areas development programme such as Hill Areas Development North Eastern Council, Border Area Development Programme, Desert Development Programme etc. The Plan acknowledged the existence of problems related to in balanced development of all the states of the country. Although in the eighties, some signs of improvement in certain less advanced states have been observed, regional disparities continue to exist. Development institutions and organisational capabilities in the backward regions of the country and the delivery system for development programmes would need to be strengthened to deal effectively with the problem of development and redistributive justice.” However it did not have any practical measures to solve the problem.

(9) Ninth Five Year Plan (1997-2002): The Ninth plan states that:

(i) It will be necessary to deliberate biased public investment in infrastructure in favour of less well-off states, and

(ii) all should cooperate and arrive at a public policy and action acceptable to all states and which will be in their interest.

(iii) Government has to introduce actively through anti-poverty programmes, direct employment policies, income enhancing programmes and asset endowment of the poor.

The Ninth Plan proposes :

(i) Increase in productivity of agriculture in backward areas; and

(ii) Increase in the degree of integration between the rural areas and the rest of the country through improved transportation and communication and provision of marketing support.

(10) Tenth Five Year Plan (2002-2007): The Tenth Plan would like to adopt a multipronged strategy to accelerate the development of less developed states and backward regions within developed states. Accordingly the Tenth Plan strategy is :

(i) High level of capital investment is an important component of this strategy. A high proportion of central assistance and states’ own resources would be devoted in improving infrastructure gaps in less developed areas.

(ii) Funds alone cannot address the problem of backwardness, and so development efforts should be accompanied by:

(a) Governance and institutional reforms to make the targeted investment effective;

(b) Decentralisation of powers and functions to help local bodies to set a pattern of development more in tune with their aspirations; and

(c) Strengthening of people’s participation to make development efforts really meaningful. de

(11) Eleventh Five Year Plan (2007-12): The Eleventh Plan seeks to target the slower growing states, and the backward areas within the states for higher level of public investment. The Plan believes that this should enable the backlog in physical and social infrastructure to be addressed.

The Plan proposes a number of initiatives for the development of North Eastern Region of the country. The Plan has adopted following measures :

(i) location of public sector projects in backward regions.

(ii) use of industrial licensing policy to direct private investment to backward regions,

(11) encouragement to prospective entrepreneurs to set up industries in backward areas by granting them subsidies and concessional finance from nationalised banks and financial institutions.

A number of public sector projects were set up in the backward states of Bihar, MP and Odisha.

(12) Twelfth Five Year Plan (2012-17): The Twelfth Plan expressed concern over increasing regional inequalities. The Twelfth Plan proposed the restructuring and strengthening of most of the programmes undertaken in the Eleventh plan. The plan correctly points out that the persistence of backwardness is not a problem that can be sloved merely with a generous infusion of funds. In fact, overcoming underdevelopment is critically dependents on the robustness of the institutional structure of governance in these areas. To improve governance in backward areas and ensure better participatory planning, the Twelfth Plan proposes a new architechture of BRGF.

The backward blocks will be determined on the basis of a host of criteria such as the population of scheduled castes and scheduled tribes and not only production and consumption indicators.

As far as development of agriculture is concerned, the most important programme initiated during the planning period was the High Yielding Varieties Programme. (HYVP). As a result of this programme, foodgrain production and productivity increased. With a view to reducing regional disparities in agricultural development, the Seventh Plan gave a high priority to the development of dry land/rainfed farming. A special rice production programme was also launched in about 20 percent of the blocks of the eastern region.

Regional Imbalance Study material

MEASURES FOR ALLEVIATION OF REGIONAL IMBALANCE

One of the major objectives of development is to reduce regional disparities. With this end in view, state policies have been patterned to help the backward regions. Economic reforms have been able to bring about balanced regional development. Within the overall framework of a national plan, regional planning is designed to formulate measures to assist the growth of certain regions while to maintain the growth of others assist the governments in examining the regional implications of undertaking infrastructural developments and lay down detailed plans for economic activity in the different regions of the country. Following measures have been adopted to remove the regional disparities :

(1) Development of small industries : The small scale industries are mostly set up to satisfy local demand and they can be dispersed over all the state very easily. They can also effect a quantitative and qualitative change in the economy of a state. Small Industries Development Organisation (SIDO) helps the entrepreneurs by providing financial assistance to set the small industries in the backward regions.

(2) Banking expansion: In order to accelerate the pace of industrialisation in backward, banking expansion is granted in backward and rural areas. The Government has established a new Rural Infrastructural Development Fund within NABARD for the infrastructural development in rural as well as backward areas. In recent year SIDCO has sanctioned 50 percent of its loan under concessional finance scheme to backward districts.

(3) Exemption from Sales Tax: The Wan Chov Working Groun recomm nded the exemption from sales tax for a period of 5 years. The recommendation was broadly accepted by the Government and was impleme modification. accepted by the Government and was implemented with some loan : The three major public sector financial institutions, viz., Industrial Development Bank of India Development Bank of India (IDBI), the Industrial Finance Corporation of India (IFC) and the ICICI provide concessional finance for industrial projects located in backward areas. These concessions relate to a lower rate of interest, a longer period of repayment, participation in the risk capital or debenture issues, charging only half the normal rate of underwriting commission etc.

(5) Project Report: The public sector financial institutions have prepared, at their own cost, feasibility study of projects which seem promising and they encourage prospective entrepreneurs to asseses them and take interest in implementing them.

(6) Concessional facilities : The State Governments have offered incentives to attract private investment in backward regions. These incentives are in the form of developed plots with power, interest free loans, concessions on sales tax dues, exemption from payments of water charges, exemption from payment of property taxes for initial years, subsidy on industrial housing scheme, establishment of industrial for setting up small industries etc.

(7) Stimulation to Capital Investment : The Central Government announced the scheme of Central Government subsidy which made a provision for subsidiary at the flat rate of 10 percent subject to a maximum limit of 5 lakh on fixed capital investment like land, factory, building, plant and machinery, subsequently, this rate of subsidy was raised to 15 percent and then to 25 percent.

(8) Transport Subsidy Scheme: Under this scheme, industrial units set up in hilly, remote and inaccessible areas were entitled to 50 percent transport subsidy on the expenditure incurred for movement of raw materials and finished goods to and from certain selected rail heads to the location of industrial units. This was in case of Jammu and Kashmir and north-eastern hill states.

(9) Privatisation : State Governments attract private investment through the grant of fiscal and other concessions. There is even competition among states in granting these concessions. The government provides a number of fiscal and financial incentives like central investment subsidy, tax rebates and income tax concessions etc. to industrial units set up in the specified backward areas.

(10) Simple licensing system : To encourage potential entrepreneurs to set up industries in the backward areas, the industrical licensing policy is liberalised.

Regional Imbalance Study material

EXERCISE QUESTIONS

Long Answer Questions

1 What do you understand by regional imbalance? What are its causes ? Suggest the measures for removing regional imbalance.

2. Write a detailed note on regional and provincial imbalance in India.

3. What is meant by regional imbalances? Analyze critically the regional imbalances in India on the basis of indicators of regional imbalances.

4. Throw light on the causes of regional imbalance in India. Suggest measures to reduce them.

5. To what extent regional imbalances are found in the Indian economy? Discuss their causes and effects.

6. What are the causes of regional and provincial imbalances in India ? Discuss the measures adopted during the five year plans.

7. What do you know about regional imbalances in India? Explain their causes and effects.

Short Answer Questions

1 What is meant by regional imbalances ?

2. What do you know about regional imbalances in India?

3. To what extent regional imbalances are found in the Indian economy?

4. Write the effects of regional imbalances.

Regional Imbalance Study material

Objective Questions

(1) Select the Correct Alternatives :

1 The main economic cause of regional imbalance is :

(a) fertile land

(b) availability of raw materials

(c) facility of capital investment

(d) none of these

2. The political cause of the regional imbalance is :

(a) concessions granted by the government

(b) casteism (c) economic crisis

(d) unemployment

3. The main cause of the regional imbalances in India is :

(a) political instability

(b) per capita income

(c) castism

(d) lack of labour mobility

4. The natural causes of regional imbalances is :

(a) availability of means of power

(b) possibility of exports

(c) trends of consumption

(d) means of transport

5. Regional imbalance means :

(a) appropriate climate

(b) underdevelopment of available resources

(c) availability of resources

(d) none of these

[Ans.: 1. (c), 2. (a), 3. (b), 4. (a), 5. (b).]

Regional Imbalance Study material

(II) State True and False :

1 Disparity in income exist in the people of different regions and provinces.

2. Entrepreneur is the main factor of production who makes efforts for the development.

3. Trends of savings and investments are not important for economic development.

4. Those areas are not developed in which export-oriented goods are produced.

(Ans.: 1. True, 2. True, 3. False, 4. False.]

(III) Fill in the Blanks :

1 laborers are essential for the economic development of a country.

2. ………………… of public undertakings should be only in backward regions.

3. The ……………… states are able to attract considerable amount of private investment and are able to exploit existing resouces.

4. Regional imbalance is responsible for ………………. development of the country.

Ans. : 1. Efficient 2. Development and expansion 3. better-off and developed 4. unbalanced)

Regional Imbalance Study material