BCOG 172 Indian Economy Solved Question Paper June 2026 for IGNOU Bachelor of Commerce (General) BCOMG

Economic development, its determinants and non-economic factors

Question 1: What is meant by economic development? Describe the main determinants and role of non-economic factors in economic development. (5 + 15)

Meaning of economic development

Economic development is a sustained rise in the real per capita income of a country that comes with structural change and a broad improvement in people's living standards. Growth measures how much more an economy produces; development asks whether that extra output reaches people as better health, education, jobs and choices.

Dudley Seers (1969) put it simply: if poverty, unemployment and inequality have all fallen, a country has developed. Amartya Sen later described development as the expansion of people's real freedoms. The UNDP's Human Development Index, first published in 1990, reflects this wider view by combining life expectancy, education and income.

Development therefore has three features. It is a process that continues over time, it involves structural change from agriculture towards industry and services, and it is judged by welfare outcomes rather than output alone.

Main determinants of economic development

The determinants are usually grouped into economic and non-economic factors. Economic factors decide how much a country can produce; non-economic factors decide how well those resources are actually used.

1. Natural resources: land, minerals, water and energy set the starting base. Japan shows that a resource-poor country can still develop through skill and technology, so resources help but do not guarantee development.
2. Capital formation: a higher rate of saving and investment adds machines, roads and factories. Low income keeps saving low, which Ragnar Nurkse described as the vicious circle of poverty.
3. Human capital: an educated and healthy workforce is more productive and adopts new methods faster.
4. Technology and innovation: Joseph Schumpeter saw the innovating entrepreneur as the engine of development, because new techniques raise output from the same inputs.
5. Infrastructure: power, transport, telecom and banking lower the cost of doing business in every other sector.
6. Market size and foreign trade: a large market justifies large-scale production, and exports earn the foreign exchange needed to import capital goods.
7. Population and structural change: a large working-age population helps only if jobs are created. Moving labour out of low-productivity farming raises average income.

Role of non-economic factors

Economic resources alone cannot explain why some countries develop faster than others with similar endowments. Social, political, cultural and institutional factors shape the willingness to save, invest, innovate and work, and so they decide how productive the economic factors become.

1. Social institutions and attitudes: rigid customs that restrict the choice of occupation, or heavy spending on ceremonies instead of investment, slow development. A society open to change and mobility supports it.
2. Education and health: literacy spreads new ideas and raises productivity. Kerala's high human development at moderate income levels shows how much education and health add to welfare.
3. Political stability and good governance: investors commit capital only when policies are predictable. Corruption and red tape raise costs and discourage enterprise.
4. Institutions and rule of law: secure property rights, enforceable contracts and a sound banking system encourage long-term investment.
5. Religion and culture: Max Weber argued in The Protestant Ethic and the Spirit of Capitalism (1905) that values favouring hard work and thrift helped capitalism grow. Values that respect enterprise and learning support development.
6. Desire for progress and entrepreneurship: people who want material progress and are willing to take risks turn resources into businesses and jobs.
7. Status of women: when women study and work, household income rises and children's health and schooling improve.
8. Decentralisation and participation: India's 73rd and 74th Constitutional Amendments, passed in 1992, gave panchayats and municipalities a role in local planning, bringing development decisions closer to people.

Conclusion: Economic development depends on capital, technology and resources, but non-economic factors decide how productively they are used. For India, better education, health, governance and social attitudes matter as much as higher investment if growth is to become lasting development.

Multidimensional poverty index and India's poverty alleviation strategy

Question 4: Explain the concept of multidimensional poverty index and its components. Discuss poverty alleviation strategy in India. (5 + 15)

Concept of the Multidimensional Poverty Index

The Multidimensional Poverty Index (MPI) measures poverty through the deprivations a person faces at the same time, not through income alone. It was launched in 2010 by the Oxford Poverty and Human Development Initiative (OPHI) and the UNDP, using the method developed by Sabina Alkire and James Foster.

A person is counted as multidimensionally poor if they are deprived in at least one-third of the weighted indicators. The index combines two parts: the headcount ratio (H), which is the share of people who are poor, and the intensity (A), which is the average share of deprivations among the poor. So MPI = H × A.

Components of the MPI

The global MPI has three dimensions of equal weight, one-third each, and ten indicators:

1. Health: nutrition and child mortality.
2. Education: years of schooling and school attendance.
3. Standard of living: cooking fuel, sanitation, drinking water, electricity, housing and assets.

India's national MPI, published by NITI Aayog, keeps the same three dimensions but uses 12 indicators. It adds maternal health under health and bank account under standard of living, and it draws its data from the National Family Health Survey (NFHS).

NITI Aayog's 2023 progress review found that the share of multidimensionally poor people fell to 14.96% in 2019-21, with about 13.5 crore people moving out of multidimensional poverty after 2015-16. Its January 2024 discussion paper estimated a fall from 29.17% in 2013-14 to 11.28% in 2022-23.

Poverty alleviation strategy in India

India has fought poverty through a mix of growth, direct programmes and social protection. Over time the strategy has moved from relying on growth to trickle down, to targeting poor households directly, and now to delivering benefits through bank accounts and digital identity.

1. Growth-oriented approach: the early Five Year Plans assumed that rapid, industry-led growth would lift incomes. Faster growth after 1991 did reduce poverty, but it also showed that growth alone does not reach every region or group.
2. Self-employment programmes: the Integrated Rural Development Programme (IRDP) gave assets and credit to poor families. It was merged into the Swarnjayanti Gram Swarozgar Yojana in 1999, which was restructured in 2011 as the National Rural Livelihoods Mission, now called DAY-NRLM and built around women's self-help groups.
3. Wage employment: the Mahatma Gandhi National Rural Employment Guarantee Act, 2005 gives a legal guarantee of 100 days of wage work a year to every rural household whose adult members volunteer for unskilled manual work.
4. Food security: the Public Distribution System and the National Food Security Act, 2013 cover up to 75% of the rural and 50% of the urban population with subsidised grains. Under the Pradhan Mantri Garib Kalyan Anna Yojana these grains are now given at no cost.
5. Basic needs and housing: Pradhan Mantri Awas Yojana (2015) for housing, Swachh Bharat Mission (2014) for sanitation, Ujjwala Yojana (2016) for LPG connections and Jal Jeevan Mission (2019) for tap water target the living-standard deprivations that the MPI measures.
6. Health and social security: Ayushman Bharat PM-JAY (2018) gives hospital cover of up to ₹5 lakh per family per year, and the National Social Assistance Programme (1995) pays old-age, widow and disability pensions.
7. Financial inclusion and direct benefit transfer: Pradhan Mantri Jan Dhan Yojana (2014) opened bank accounts for the poor, and the JAM trinity of Jan Dhan, Aadhaar and mobile lets subsidies reach accounts directly, reducing leakage. PM-KISAN (2019) pays ₹6,000 a year to eligible farmer families.
8. Human capital: the Right to Education Act, 2009 and school meal schemes, now PM POSHAN, keep poor children in school and address the education and nutrition indicators of the MPI.

Assessment

These programmes have helped cut multidimensional poverty sharply, but gaps remain: exclusion errors in targeting, delays in wage payments, poverty concentrated in states such as Bihar, Jharkhand and Uttar Pradesh, and slow growth of productive jobs outside farming. Lasting success needs faster job creation alongside social protection.

Conclusion: The MPI shows that poverty is about health, schooling and living conditions as much as income. India's anti-poverty strategy now targets these very deprivations, which is why the MPI has become a useful yardstick for judging how well the programmes work.