Basic Features of

Indian Economy
By: Shikha Gupta
Classification of economies
According to World Development Report 2012
published by World Bank

Economies are classified according to income

per capita and by region

20! economies "hich have a population of more

than #0$000 are ranked by their levels of %&ross
national income'&() per capita
Definition of Underdeveloped
countries
According to *he +nited (ations
,An underdeveloped country is one "hich has
real per capita income that is lo"er in relation
to the real per capita income of the
+-A$.anada$Australia and Western Europe

According to *odaro$ ,+nderdeveloped

economy is that economy in "hich there are

lo" level of living

absolute poverty

lo" per capita income

lo" consumption levels

poor health services

high death rates

dependence on foreign economies

Basic Features Of
Underdeveloped Countries

/o" per capita income

/o" level of living

0igh )ne1uality of )ncome

Widespread 2overty

2opulation e3plosion

/o" level of productivity

/o" rate of capital formation

/ess development of 0uman .apital

2rimitive *echni1ues of
production%*echnological Back"ardness'

E3cessive Dependence on agriculture

+nemployment and underemployment

+nderutili4ation of natural resources

Dualistic economy

E3port of primary products

+ndeveloped countries%+D.5s'or less

developed .ountries%/D.5-' are no" called
Developing Countries "hich is indicative
of the fact that these poor back"ard
countries are capable of developing and are
making efforts to get rid of their poverty and
stagnation

*hese developing countries are also kno"n

by the name of the Third World
Countries6
Indian Economy

The Indian economy can be analyzed from various

angles such as ;

The form of Economic Organization- Organizational

setup of the Indian economy is a mixture of capitalism
and socialism ,commonly known as Mixed conomy

Structure of the economy!"tructure wise ,India

has a dualistic character where the small ,but
growing modern sector is coexisting with vast and
sprawling traditional sector#

Stage of Growth and development- Indian

conomy is a developing economy
India :a developin economy

India ,which for long has been defined as an

underdeveloped country is now called a
developing economy#

$ developing economy is characterized by a

mixture of features of an underdeveloped
stagnant economy and those of a steadily
progressing economy#
Features of India!s
underdeveloped economy

"# $o% per capita income:

)ndia per capita income is very lo" as

compared to the advanced countries

According to the World Development Report 2012,India had
per capita national income of $1340 in 2010.India per
capita income i almot !0 time lo"er than that of
"it#erland,3$time lo"er than the %&A and aro'nd 30time
lo"er than %( and )erman*.
&er capita G'I at (arket &rices
)*+"", In US Dollars
.ountries E3change Rate Basis 2urchasing 2o"er
2arity Basis
-"it4erland 78$900 :2$:70
+-A 9!$820 9!$!20
;A2A( 99$<00 #:$##0
&ermany 99$270 90$2#0
+= #7$!90 #8$010
)ndia 1$910 #$:<0
.hina 9$<90 !$<<0
*#$o% levels of livin- /o" per capita income in
the underdeveloped countries results in very much
depressed levels of living of their people
)n terms of food value $the consumption in the
underdeveloped countries is around 2000 calories
"hile the average calorie intake in advanced
countries is around #000
+or e.g. ,he per capita dail* calorie 'ppl* in India i onl*
2104 "herea in the %.&.A it i 3---,.anada 344! and
&"it#erland 3$4!
3.High Inequality of Incoe!*he gap bet"een
"ealth and poverty is e3ceedingly "ide in
)ndia A handful of rich persons get a relatively
large share of the total income "hile the large
mass of poor population gets a relatively small
portion of it

)ne1ualities of income distribution are to be

observed both in the rural and urban sectors
of the economy

)ne1ualities of income are to be seen in the

form of une1ual distribution of land in the
agricultural sector and concentration of
economic po"er in non>agricultural sector
9Widespread poverty>When international
poverty line "as calculated for ?2 per person
per day $almost !0@ people in )ndia "ere living
belo" the poverty line in year 200:>08
*he ne" )nternational poverty line is set at
12: a day in 200: 222 terms
".High #ate of population $ro%th! )ndia has
the second highest population and is in the
stage of population e3plosion

)ndia5s 2opulationA1$2:!9 million in 2012

)ndia5s average annual gro"th%2001>11'A17

percent

Density%people per s1uare km'%200<'A#!<

&.'o% 'evels of (roductivity!)n )ndia$
productivity levels are very lo" mainly because
ofB

/ess use of capital in the form of modern

machines and e1uipments

/ess efficiency in the "ork force due to poor

health and poverty

/o" Work culture due to lack of incentives

and discipline
).'o% #ates of capital foration>)n )ndia$
rate of capital formation has not been steady
over the years it increased steadily during the
first fifteen years of planned development but
later it reduced due toB
a' /o" rate of saving
b' -lo"er increase in private investment
c' )nade1uate Ciscal measures
d' )neffective resource mobili4ation
*. (oor +uality of Huan Capital!)n )ndia
$the seventh Cive year 2lan puts in print the
importance of human capital in economic
gro"th Dain problems of human .apital
formation in )ndia areB
a' 0igh regional and gender ine1uality
b' Brain drain or migration of highly skilled
professionals
c' )nsufficient on>the Eob training
d' 0igh poverty level
,.Technological -ac.%ardness!. *he
techni1ues of production employed in most of
the sectors of the underdeveloped economies
are obsolete or outdated

)n )ndia$ for eg agriculture is largely carried

on "ith the techni1ues "hich are centuries
old Doderni4ation in the industrial sector is
also very limited

)ndia has lo" levels of living According to

the data sho"n by 0uman Development
Report 201#

*otal population %2012'A 1$2:!9 million

*otal unemployment rate%both

&enders'2010A#8 percent

Adult literacy rate%ages 1: and older'%200:>

2010'A82!

/ife e3pectancy of birth %2012'A8:!year

2opulation not using an improved "ater

source%2010'A11< percent

)nternational 2overty lineB2opulation

belo"?12: a day %2002>2011'A#27 percent

2opulation belo" national poverty line%2002>

2012'
/0. (redoinance of 1griculture!)n )ndia$
agriculture contributes 191 per cent to the
&D2%at constant 2009>0: prices' in 2011>12 )t
provides employment to around :! per cent of
the total labour force %as per .ensus 2011'
)t means that :!@of labour forces that depends
on agriculture is generating 191@ of &D2
)n other "ords$ the remaining 92 percent of
labour force that is engaged in non>agricultural
occupations is generating !:8@of&D2
)t sho"s )ndiaFs underdeveloped nature because
as a country develops the percentage share of
agriculture in &D2 must go do"n
//.High level of 2neployent and
+nderemployment> 0igh level of
unemployment and underemployment is
observed in )ndia
)n )ndia$labour force is gro"ing at rate of 2!9
percent annually$ but employment is gro"ing
at the rate of 282 percent
*he rate of unemployment is nearly 88 per
cent %on .D- basis in 200<>10'%Economic
-urvey 2012>1#'
Gro%th .Oriented features of
indian economy
/uantitative)national Income
0rends,
/.Increase in investent!During the
successive five year plans$ huge investment
has been made in the economy both under the
public as "ell as the private sectors
Rate of invetment/)ro dometic capital formation
,remendo' improvement over the lo" rate of 10$0 and
-0
Gears RH)
1<:0>:1 Hnly !9 @
2007>0! #!1 @
2010>11 #8! @
2011>12 #!0 @
3.Increase in 4ational and per capita
incoe5>As a result of the massive investment
efforts made during the five>year plans$ the
national income in in )ndia recorded an
impressive rise
Gear ()
%current
2rices'
()
%constant
2rice'
2er capita
income%at
current
prices'
2er .apita
)ncome%at
constant
prices'
1<:0>:1 Rs<989
.rore
Rs 2$::$90:
crore
Rs289 crore Rs7$119 .rore
2011>12 Rs7#$<<$
<#: crore
Rs9:$7207:
crore
Rs81$:89
.rore
Rs#!$0#7
crore
3.Increase in $ro%th rate! )ndia has achieved
a significant increase in the gro"th rate of the
economy since it began its development efforts
in 1<:0>:1
1<:1>1<!0 #: @
1<!1>2001 : @ and above
200! !@ to <@ *hen recession
pulled it do"n to 7@
2012>1# /o" gro"th rate of about
:@ %due to unfav Domestic
and global factors'
Structural Chanes
1-ignificant changes in sectoral distribution of
domestic product
2)ncrease in social and economic overheads
# 2rogress in the banking and financial sector
9 &ro"th and diversification of )ndustry
:.hanges in employment structure
&. &ro"th and diversification of )ndustry
7 )ncrease in Agriculture 2roduction
Increase in 1griculture (roduction 6*he
agricultural sector has sho"n a sufficient
increase in the gro"th of output over the years
of economic planning
*he inde3 of agricultural production %"ith base
1<!1>!2A100' "ent up from !:< in 1<70>71 to
18:7 in 2000>01 thereafter$ it rose to 21:#
in 2010>11

$ro%th and diversification of Industry 6

*he maEor achievement of planning has been
diversification and e3pansion of )ndia5s
industrial capacity

*he country is no" -elf Isufficient in

consumer goods and in basic industrial items
like steel

)ndia can no" sustain gro"th of its industries

on the domestic production of capital goods

*he End