Features of Indian Economy

Indian economy bags the seventh position among the other strongest and largest economies
among the world. Being one of the top listed countries among the developing countries in terms
of industrialization and economic growth, India holds a robust stand with an average growth
rate of approx 7%.

The Indian economy has emerged as a robust economic player among the economic giants like-
US, UK, China, etc. Even though the rate of growth has been sustainable and comparatively
stable, but there are still fair opportunities of growth.

With the growing standards and opportunities in India, it is expected to very soon capture a
very dominant position among the others in the world. The characteristic features of India
Economy is discussed below in details:

Features of Indian Economy

1. India has a mixed economy

2. Agriculture plays the key role in supporting the Indian economy

3. Newly Industrialized Economy – good balance between agriculture and industrial

sector

4. An Emerging Market

5. A Major Economy

6. Federal in Character

7. Fast Growing Economy

8. Fast growing Service Sector

9. Unequal distribution of Income economic disparities

10. Instability of price – Cost of products is not stable

11. Lacks proper infrastructure

12. Inadequate Employment opportunities

13. Large Domestic consumption

14. Rapid growth of Urban areas

15. Stable macro economy

 16. Excellent human capital

17. Large Population

18. Unequal wealth distribution

19. Pursues labor intensive techniques

20. Technological use is less in comparison to the well-developed economies

Conclusion

These are the major characteristic feature of the Indian economy. India is an active member in
various economic groups’ like-BRICS and G-20. Not only does India have the potential in the
form of human capital and other raw materials, but is also technically advanced to support
maximum growth in the country. This is a true indicator of inviting foreign investments and
creating the best growth situation for both the foreign and national crowds.

To read more click below:

Indian Economy: A Complete Study Material
Some features of Indian economy are given below:

1. Low per Capita Income: India’s per capita income is very less as compare to developed
countries.  As per the estimates of the Central Statistics Office (CSO), the per capita net national
income of the country at current prices for the year 2015-16 is estimated to attain the level of Rs.
93231/-. The per capita net national income at constant prices (2011-12) for the year 2015-16 is
estimated to attain the level of Rs. 77, 431/-. As per the CSO’s estimates, the per capital net
national income at current prices is  

2012-13 ……Rs. 71050/-

2013-14 …… Rs. 79412/

2014-15 …….Rs. 86,879/- 

The per capita net national income at constant prices (base year 2011-12)
+2012-13……. Rs. 65,664/-

2013-14……. Rs. 68867/-

2014-15. ……Rs. 72889/-

2. Agriculture Based Economy: Agriculture and allied sectors provide around 14.2% of Indian
GDP while 53% of total Indian population is based on the agriculture sector.

3. Over population: in every decade Indian population get increased by about 20% . During the
2001-11 population increased by 17.6%. Currently India is adding the total population of Australia
every year.  India is the possessor of around 17.5% population of the whole world.

4. Income Disparities: a report released by Credit Suisse revealed that the richest 1% Indians
owned 53% of the country’s wealth, while the share of the top 10% was 76.30%. To put it
differently, in a manner that conveys the political economy of this stunning statistic, 90% of India
owns less than a quarter of the country’s wealth.

5. Lack of Capital Formation: Rate of capital formation is low because of lower level of income.
Gross domestic capital formation was 23.3% in 1993-94 increased upto the level os 38.1% in
2007-08 but declined upto 34.8% in 2012-13.

6. Backwardness of Infrastructural Development: As per an recent study, 25% of Indian

families don’t have reach of electricity and 97 million peoples don’t have reach of safe drinking
water and 840 million people in India don't have sanitation services. India needs 100 million dollar
for infrastructural development upto 2025.

7. Market Imperfections: Indian economy doesn’t have good mobility from one place to other
which hinders the optimum utilization of resources. These market imperfections create the
fluctuations in the price of commodities every year.

8. Economy is Trapped in the Vicious Circle of Poverty: Prof. Ragner Nurkes says that ‘a
country is poor because it is poor’.  It means poor countries are trapped in the vicious circle of
poverty.

9. Use of Outdated Technology: It is very clear that Indian production technique is more labour
oriented in nature. So it increases the cost of production of the products made in these countries.

10. Traditional Set Up of Society: Indian societies are trapped in the menace like casteism,
communalist, male dominated society, superstitions, lack of entrepreneurship, and ‘chalta hai
attitude’ of the peoples. These all factors hindered the growth of the country as a whole.
 Basic/ Important Features of Indian Economy
Mixed Economy
 An economic system in which both the private enterprise and a degree of state monopoly (usually
in public services, defense, infrastructure, and basic industries) coexist.

 All modern economies are mixed where the means of production are shared between the private

and public sectors.

 Also called dual economy.

 Indian Economy is a unique blend of public and private sector which is a main feature of mixed
economy.

Pre-dominance of Agriculture.
 Agriculture and allied sectors provide around 14.2% of Indian GDP while 53% of total Indian
population is based on the agriculture sector.

 In most of the countries of Asia, Middle East and Africa, from two-thirds to four- fifths of their
total population are solely dependent on agriculture.

 In most of the developed countries like U.K., U.S.A. and Japan, the percentage of active population
engaged in agriculture ranges between 1 to 5 per cent.

High population.
 High population growth rate is also an indicator of underdevelopment.
 India’s population growth rate was 1.93% per annum and 21.34 % per decade during 1991-2001,
which is still very high as compared to developed economies.

 Over population creates complex economic problems. India is the second largest populated country
in the world having population of 238 million in 2001 and 1138 million in 2011.

Underutilized Natural resources.

 It has been stated that India is a rich country inhabited by poor people.
 Various types of natural resources, viz., land, water, minerals, forest and power resources are
available in sufficient quantity in the various parts of the country.

 But due to its various inherent problems like inaccessible region, primitive techniques, shortage of
capital and small extent of the market such huge resources remained largely under-utilised. A huge
quantity of mineral and forest resources of India still remains largely unexplored.
 Low Human Development Index.
 India continued to rank low in the Human Development Index (HDI), but climbed five notches to
the 130th rank in the latest UNDP report on account of rise in life expectancy and per capita
income.

 India's 2014 HDI of 0.609 is below the average of 0.630 for countries in the medium human
development group.

Lack of infrastructure facility.

 Lack of infrastructural facilities is one of the serious problems from which the Indian economy has
been suffering till today.

 These infrastructural facilities include transportation and communication facilities, electricity

generation and distribution, banking and credit facilities, economic organisation, health and
educational institutes etc.

Capital deficiency.
 Capital deficiency affects economy as well as social factors, India suffers from deep rooted
shortage of capital.

 The level of savings is very low and capital formation rate is also low. Capital deficiency is very
low because the population rate rises at a rapid rate

Unemployment.
 Unemployment is a phenomenon that occurs when a person who is actively searching for
employment is unable to find work.

 Unemployment is often used as a measure of the health of the economy.

 Unemployment in India is a serious social issue.
 Unemployment records in India are kept by the Ministry of Labour and Employment of India.
 The most frequently measure of unemployment is the unemployment rate, which is the number of
unemployed people divided by the number of people in the labor force.

Poor economic organizations.

 Economic organization is an important and pushing factor for economic institutions have been
working in India, however it is not developed enough.

 Banking systems are not developed well in rural areas, in recent years capital and money markets
are not much developed in India.
 Industrial banks, financial institutions are not very common in India. In this point of view India has
lack of structural economic organization set up.

Low per capita income.

 In India, the national income and per capita income is very low and it is considered as one of the
basic features of underdevelopment.

 India per capital income is very low as compared to the advanced countries.
 For example the capital income of India was 460 dollar, in 2000. Where as their capita income of
U.S.A in 2000 was 83 times than India.

 This trend of difference of per capita income between under developed and advanced countries is
gradually increasing in present times.

Economic backwardness.
 India is developing country and has been facing the problem of unemployment, poverty, low per
capita income, lack of technology, high growth rate of population, low labor efficiency, economic
ignorance, social and religious problems factors, immobility, limited developed occupation and
trade, caste system, corruption at every stage.

 Thus reflecting India as economically back ward country.

Poverty
 Poverty is an important issue in India, despite having one of the fastest growing economies in
the world, clocked at a growth rate of 7.6% in 2015, and a sizable consumer economy

 Deutsche Bank Research estimated that there are nearly 300 million people who are middle class. If
current trends continue, India's share of world GDP will significantly increase from 7.3% in 2016
to 8.5% by 2020. In 2015, around 170 million people, or 12.4%, lived in poverty (defined as $1.90
(Rs 123.5)), a reduction from 29.8% in 2009.

Nature of Indian Economy

Indian Economy is the best Examples of Mixed Economy. Here we discuss all the basic
types of Economy. In general their are 3 forms i.e.Mixed Economy, Agrarian Economy,
Developing Economy. We can also broadly classifiy the Economy as Primary, Secondary and
Tertiary. Here we will discuss all types as shown in the given tabular forms. 

Nature of Indian economy can be discussed under two heads

1 India –An underdeveloped economy.
a) Low per capita income.
 b) Inequitable distribution of income.
c) High incidence of poverty.
d) Pre dominance of agriculture
f) Low level of human development.
g) Unemployment.
h) Scarcity of Population.
i) Technological backwardness.
j) Lack of entrepreneurs.

2 India –A Developed economy.

a) Rise in National income, Per capita income.
b) Structural changes.
c) Growth of basic and capital goods.
d) Expansion of social overhead capital.
e) Growth of banking and financial sector.

Mixed Economy Agrarian Economy Developing Economy

In exists in both public and
private sectors.
In the entire plan period, the
Government has invested 45%
capital in public sector.
51% of work force of India is Low per capita income and low
agriculturist. rate of economic growth.
Its contribution of GDP is High proportion of people is
17.4% in 2011-2012. BPL (Below the Poverty Line)

Primary Sector Secondary Sector Tertiary Sector (Service

It is based on agriculture,
forestry and fishing.
It is based on manufacturing,
mining, electricity, gas and
water supply, construction.
Sector)
It is based on
telecommunication, business
transport, real estate, banking
insurance, community and
personnel services.

Planning in India (Role of Planning Commission) – Planning Commission

is set up in March, 1950. There are some aims of planning. It must raise the
standard of living of the people. It must reduce economic and social
inequalities. It provides a balanced regional development. 
National Development Council (NDC) – It is the highest decision making
body in respect of planning. It helps in the execution of common policies in
various important spheres of economy of country and thus ensures balanced
economic development of the country.
Some Historical Milestones -
 Planned Economy for India (1934) – M. Visvesvaraya
 National Planning Committee (1938) – Jawaharlal Nehru
 Gandhian Plan (1944) – S. N Agarawal
 People’s Plan (1945) – M. N Roy
 Sarvodaya Plan (1950) – J. P Narayan
NITI Aayog – NITI Aayog stands for National Institution for
Transforming Indian Aayog. It was established on 1st January, 2015. It is
the policy making think-tank of Government that replaces the planning
commission and aims to involve states in economic policy making. The Prime
Minister is the Chairman of the NITI Aayog. Dr. Rajiv Kumar is the Present
Vice-Chairman of NITI Aayog of India.

FIVE YEAR PLAN - IMPORTANT HIGHLIGHTS

Plans Targeted Achieved Priority Given Features and Mottos
Growth Growth
1st Five 2.1% 3.6% Agriculture, power, It is based on the Harrod-
Year Plan transport, price Domar Model.
(1951-56) stability, irrigation Community Development
and electricity program was launched in
1952.
2nd Five 4.5% 4.2% Heavy Industries It is also known
Year Plan asP.C.Mahalanbis
(1956- Plan after its architect.
1961) Its main objective was rapid
industrialization.
3rd Five 5.6% 2.8% Food grains, Heavy Its aim was to make India
Year Plan Industries “Self Reliant” and “Self-
(1961- Generating”.
1966) It was a complete failure due
some misfortunes like
Chinese Aggression, Indo-
Pak war, severe drought.
Plan An agricultural strategy was
Holiday taken involving distribution
(1966- of high-yielding seeds, use of
1969) fertilizers, exploitation of
irrigation potential, soil
conservation etc.
4th Five 5.7% 3.2% Agriculture Did well in first two years,
Year Plan later failed due to poor
(1969- monsoon.
1974) Had to tackle Bangladesh
Refugees after Indo-Pak war.
5th Five 4.4% 5.0% Removal of Poverty, It was proposed by D D
Year Plan “attainment of self- Dhar.
(1974- reliance” Distribution of income,
1978) significant growth in
 domestic rate of savings.
Rolling It was made by Janata Dal
Plans (then Ruling Party) for two
years.
6th Five 5.2% 5.5% Agriculture Major aims were –increase in
Year Plan Industries National Income,
(1980- advancement of technology,
1985) decrease of poverty and
unemployment, population
control.
7th Five 5.0% 6.0% Energy and Food It increases employment
Year Plan grains opportunities and
(1985-1990 productivity.
Annual
Plans
8th Five 5.6% 6.6% Human Resource Rapid economic growth, high
Year Plan Education growth of agriculture and
(1992- allied sectors, manufacturing
1997) sectors, better import and
export, improvement in trade
and current account deficits.
9th Five 6.5% 5.4% Social Justice It has four important
Year Plan dimensions. i.e. quality of
(1997- life, generation of productive
2002) employment, regional
balance and self reliance.
10th Five 8.1% 7.6% Income and Energy Increased literacy rate,
Year Plan universal access to primary 
(2002- education.
2007)
11th Five 8.0% 7.9% Inclusive Growth Increased GDP, increased
Year Plan literacy rate, reduced infant 
(2007- mortality rate, increased sex
2012) ratio.
12th Five 8% --- Faster, sustainable Reduce poverty, growth in
Year Plan and Inclusive agriculture and
(2012- Growth manufacturing industry,
2017) reduced infant mortality rate
and increase job
opportunities.

National Income of India – It is an instrument to measures the net value of

respective goods and services produced in a nation during a financial year.
And it also include net earned foreign income. 
Related to Domestic Product – 

 Gross Domestic Product at Market Price = Market Value of final output of

goods and services produced within the domestic economy of a country in one
year. 
 It also includes the net earned foreign income. 
 The total National income measures the flow of goods and services in
the economy. 
 Net Domestic Product at Market Price = GDP – Depreciation. 
 Net Domestic Product at Factor Cost = NDP (MP) – Indirect Taxes +
Subsidies 
Related to National Product – 

 Gross National Product at Market Price = GDP (MP) + Net Factor Income
from Abroad 
 Net National Product at Market Price = GNP (MP) – Depreciation 
 Net National Product at Factor Cost or National Income = National
Product (MP) – Indirect Taxes + Subsidies 
 Per Capita Product / Income = National Income / Population = Net
National Product at Factor Cost / Population

Important Note Down Points

 The 1st estimate of National Income – Dadabhai Naoroji (1867-68) 
 First Scientific Estimate – Prof. V K R V Rao (1931-32) 
 National Income Committee (1949) – P. C Mahalanobis (Chairman) 
 The task of National Income was entrusted to the CSO (Central
Statistical Organization) 
 The Indian Economy is divided into 9 sectors at present and the base
year is 2011-2012 (2015 onwards).

Studying the Structure Changes

in Indian Economy
In order to study the structural change in any economy, one have to
analyse the contribution of various sectors to the national output.

We will study the trends in the distribution of national income by

industrial origin at 1980-81 prices.
The analysis of the above table gives us the idea about the
structure changes in Indian economy since 1950-51:
ADVERTISEMENTS:

(i) Decreasing Share of Agriculture Sector:

The table shows that the share of agriculture sector to national
income has been constantly decreasing. In 1950-51, the share of this
sector was 55.4% and it decreased to 38.1 percent in 1980-81. In
1999-2000, the share come down to 25.2 percent. The history of
economic development of advanced countries indicates that the
contribution of agricultural sector to national income goes on
decreasing as the country develops.

The contribution of agriculture sector to national income is 2 to 3

percent in advanced countries like U.S.A., U.K., Germany and
Canada. The decreasing share of agriculture to national income in
India indicates this broad trend. It shows that economy has been on
the path of development. The decreasing share of agriculture shows
the changes in the structure of production.

ADVERTISEMENTS:

The share of agriculture to national income is quite high in relation to

advanced countries. Above all 60% of work force is employed in
agriculture while in U.K. and U.S.A. only 2% of their work force is
employed in agriculture. This shows that the occupational structure
in India could not match with the change in structure of production.
(ii) Increasing Share of Industries Sector:
In 1950-51, the share of this sector was 15 percent which increased to
24.4 percent in 1980-81. In 1999-2000, its share rose to 24.7 percent.
The increasing share of industrial sector shows that Indian economy
is on the way of development. The contribution of industrial sector is
very high in developed countries like U.K. and U.S.A.

According to World Development Report 1995, the share of industrial

sector to national income in the U.K. and the U.S.A. was 33 percent
each and in Japan it was 41 percent. In India though the contribution
of industrial sector is increasing, its progress is very slow. Specially
the share of manufacturing within the industrial sector has been very
slow since 1970-71. This is mainly responsible for the slow rate of
economic growth in the country.

(iii) Increasing Share of Service Sector:

The tertiary sector or service sector has been constantly increasing its
share in the national income. It includes transport, communication,
trade and commerce, banking, insurance, community and personal
services. In 1950-51, the share of service sector in national income
was 25.8 percent. It increased to 36 percent in 1980-81 and in 1999-
2000 it has gone up to 47.8%.

During the said period, transport, communication and trade have

increased their share from 11 to 21.9 percent. It shows the
development of infrastructure in the economy. In advanced
countries, the contribution of service sector to national income is the
highest.

According to World Development Report 1995, the contribution of

service sector in the U.K. and the U.S.A was 65 percent each and in
Japan 57 percent. The increase in share of tertiary sector in national
income indicates the development of Indian economy.

(iv) Overall Assessment of Structural Change:

From the above discussion of India’s sector wise contribution to
national income, one gets a clear idea regarding the extent of change
in the structure of production in the process of development. The
share of agriculture has declined and that of industry and service
sectors has increased. This is the main structural change but this
change is very slow. It has virtually given a fillip to traditional and
stagnant economy. Now Indian economy is one of the most
promising developing economies of the world.