Chapter 2
EEATURES OF INDIAN
FEA
ECONOMY SINCE
INDEPENDENCE
The term Indian economy is the outcome of two words, Indian plus economy. 'Indian refers to
hase
concernin.
India. EEconomy' refers to all those activities and arrangements which the citizens of a
nfy, either individually or collectively, undertake to satisfy their wants of food, clothing, shelter, etc.
Hian economy is not just a study of facts and figures relating to economiclife of India rather it undertakes
analuse the causes and effects of the problems pertaining to economic life. Nature of Indian economy
rames dlear from the study of following features and aspects of Indian economy:
(1) Indian Economy is an Underdeveloped Economy.
2) Indian Economy is a Mixed Economy.
Indian Economy is a Planned Developing Economy.
(4) Dualistic Nature of Indian Economy.
5) Sectoral Distribution of Indian Economy.
Acomprehensive study of above features and aspects of Indian economy is given below.
1. Indian Economy is an Underdeveloped Economy
Per capita income of some countries of the world like America, England, Japan, etc., is much
higher than that of some other countries like India, Pakistan, Sri Lanka, Bangladesh, etc. Economies of the
former countries are called developed economies. On the other hand, there are countries like India,
Bangladesh, Pakistan, etc., whose per capita income is much less than that of the
developed ones.
Economies of such countries are called underdeveloped economies. In the
words of Nobel Laureate
Samuelson, A less developed country is simply one with low real per capita income, relative to
per
capita income of such nations as Canada, the United States, Great Britain and Western
European nations.
Optimistically, a less developed country is one regarded as being capable of substantial
income level." improvement in its
1.1 Theory
of Underdevelopment
Ihere are two theories explaining why an
underdeveloped country fails to achieve economic
development.
14 Indian Econom
(1) Theory of Vicious Circle of Poverty: According
to Nurkse, the main cause accounting for Low
economies is the Income
underdevelopment of these
vicious circle of poverty found therein. Such
economies ane afflicted with low income, low Low
Low
these Productivity
saving, low capital and low productivity. All Saving
have a circular relationship as shown in Fig. 1.
Theory of Vicious Circle of Poverty explains that in
order to break this circle, underdeveloped Low
Investment
countries should increase the rate of saving and
capital fomation
(2) Theory of Low Income Level Equilibrium: Fig.1: Vicious Circle of Poverty
Prof. Harvey Leibenstein has propounded a
theory of Low Income Level Equilibrium to explain the obstacles in the way of economic
development of underdeveloped countries. Three main concusions of this theory are:
(a) Equilibrium ofan underdeveloped economy should be treated as unstable equilibrium.
(b) When a change is affected in the equilibrium of an underdeveloped economy, the very
forces which have a tendency to increase per capita income create certain conditions,
directly or indirectly, as a result of which per capita income begins to fall.
(c) Under disequilibrium condition, in the initial stage of development of an
underdeveloped economy, factors lowering the income are more powerful.
In relation to the underdevelopment of Indian economy, theories of both Nurkse and
Leibenstein are applicable. Before the dawn of independence, growth-rate of Indian economy was
almost zero, although fair amount of capital investment had taken place in the construction of roads,
railways, textile industry, iron and steel industry, mines and factories, etc. This investment did lead to rise in
national income, but as proved by Leibenstein's theory, this increase in national income could not
sustain itself for long. As a result of investment worth millions of rupees during Five Year Plans, there has
been some progress in the economy, but many opposing forces causing fall in the rate of this progress have
also been at work simultaneously. Of these, three main opposing forces have been as follows:
(i) Population Explosion, (i) Less Capital Formation, (ii) Rising Expectation of the people. These
forces led to rise in demand for goods and services and consequently gave birth to inflationary situation.
1.2 Features of Indian Economy as an Underdeveloped Economy
(1) Stagnant Per Capita Income: During fifty years prior to Independence (1947) growth rate
of per capita income per annum was less than 1 per cent. After independence, no doubt, as a
result of planning, Indian economy got a stimulus, yet the rate of increase in per capita income
remained very low. Rather, in the Third Plan it declined to 02 per cent. During the period
between 1950-51 to 2019-20, annual rate of increase in per capita income was about 3 per
cent. This stagnant per capita income is an index of underdeveloped nature of Indian
economy.
Indian Economy Since Independence
atures ofl 15
0L.ow Level of Per Capita lncome: In the words of Kurihara, "Low per capita real income
is the main feature of an underdeveloped economy." Per capita income of India is low as
compared to many countries of the the world. Comparison of per capita income of India with
some other countries is shown in Table 1.
Table 1. Comparison of Per Capita Income with Other Countries
Country Per Capita Income(in US Dollars)(Year 2019)
USA 65,850
UK 42,220
Japan 41,710
China 10,410
Sri Lanka 4,020
India 2,120
Bangladesh 1,940
Pakistan 1,410
World Average 11,571
(Source: World Development Report, 2020)
From the above table it is clear that per capita income of India is very less in comparisont
other nations. India's ranking in terms of per capita income is 138th in all the nations of the
world. Low per capita income is the symptom of an underdeveloped economy.
13Low Standard of Living: On account of low per capita income, level of consumption of
such necesities of life as food, clothing, shelter, etc., is very low. In India, in 1999 average
intake of an individual was 2,496 calories per day. As against it in developed countries,
average intake of an individual was 3,400 calories. Thus, in India most of the people do not
get balanced diet. On account of low standard of living of the people, their efficiency remains
low. Per capita low productivity is maily due to low efficiency. Consequently, per capita
income is low. It is because of low income that poor people continue to be poor.
(4) Unequal Distribution of Income and Wealth: In India, on the one hand, per capita
income is low and on the other hand, there is large inequality in the distribution of wealth-
income. According to World Development Report 2020, in India the poorest 10 per cent
population gets only 3.5 per cent of national income. As against it, the richest 10 per cent
population enjoys 30.1 per cent of national income. It may be noted that in many countries
of the worid like Japan, America, England, etc., due to inequalities in the distribution o
wealth and income, rich people saved large part of their income and invested the same to
increase capital formation. As a result, growth rate of the economy got accelerated there.
However, in India, rich people spend their wealth on conspicuous consumption, like
jewellery, gems, gold and silver. They spend lavishly on social and religious functions.
of
Consequently, very little amount of wealth is left for capital formation. During the period
and
planning in India, instead of reduction in the disparities in the distribution of wealth
income, the same have actually increased.
ndian Economyçe
n
Agriculture: In NSSO
India, as per survey reportah out 462
on
(5) Excessive Dependence
population depends on agriculture.
In 2019-20, agricul contributed 17.2 per
cent of ot population that depends oonn .agriculture
r
It that 46.2 percent
against it, the other 53.8 no
income. means
cent to national
income. As ent of
17.2 per cent
of national
generates just 32.8 per cent of the na
activities produces 82.
in non-agricultural #hna
popuation that is engaged agricultural labourer is far less
that productivity of the
income. lt clearly on agriculture is anoihu
proves
Too much dependence
productivity of non-agricultural
labourer. sign
Historically, it is proved that as a c
of underdeveloped nature
of Indian economy. untry
of its population depending on agriculture q0es on
the percentage
develops coonomically. was dependent
instance, in 1810 in
America, 75 per cent of population on
diminishing. For America is dependent on
of population of
0.7 per cent
agiculture. Cumently. about in agriculture that meets all agriculhral
cent of population engaged
agiculture. It is this 0.7 per that agriculture in America i
cent of population. It proves
needs of the remaining 99.3 per
On the contrary, 46.2 per cent
of population of India depending on
very much advanced.
meet the entire agricultural
needs of the remaining 53.8 per
agricultune is not in a position to
sectors. It is one of the main symptoms of the
cent of population engaged in non-agricultural
that a large part of its national income comes from
underdeveloped nature of a country
the percentage share of agriculture in
agriculture. As a county develops economically,
national income goes on in India the percentage share of agriculture in
falling. Although
national income is decreasing but not as much as in other countries. Contribution of
agriculture to the national income of USA, England, Germany and Japan is only about 1 per
cent.
(6) Lack of Proper Industrialisation: Rate of industrial development
has been very slow in
India. Many important industries are lacking in India. Although in the post-independence
era
etc., have developed
many consumer goods industries like textile, sugar, pharmaceuticals,
chemical
sufficiently, yet basic and producer goods industries like, machine tools industry,
industry. fertiliser industry, etc., have not developed satisfactorily. No doubt, large-scale
industries were set-up in the country some 100 years back but they could provide
employment to75 lakh persons only, till this day. It comes to just 4 per cent of the total
employment. In 2019-20, manufacturing industries and construction activities had 27.2 per
cent share in the national income. As against it, the contribution of manufacturing industries
to the national income of China was about 40 per cent. On account of backwardness, the
country has to depend on foreign countries to meet many of its requirements. Low rate of
industrial growth results in low productivity and low per capita income. Pressure of population
on agriculture increases and consequently improvement of agriculture is hindered.
(7) Lack of Proper Banking Facilities: One of the causes of underdevelopment of India is that
banking and credit facilities, especially in nural areas, have not properly developed. Most of
the population in India depends on agriculture and small industries. Poor and small farmers
and small entrepreneurs do not get loans and credit facilities at cheap rates of interest at
appropriate time and in adequate quantity. They depend on indigenous bankers for their
credit requirements. A large part of the income of farmers and small entrepreneurs goes
towards the payment of interest and repayment of the principal. They are left with no power to
save. For want of saving there is no investment. As a result, there is no development o
agriculture or industries. Thus, due to inadequate banking facilities, large number a
entrepreneurs of the country are unable to improve their economic lot.
Economy Since Independence 17
of Indian
Feau
Less Development of Means of Transport: In India, means of transport like railways
(8)
roads, air and waterways are not adequate in view of the vast geographical area. These
means being far less than the requirements have an adverse effect on the mobility of goods
and labour. It is difficult and expensive for the poor farmers to carry their farm produce to the
mandis. They are compelled to sell the same in the village at uneconomic prices. Industries
also face difficulty in getting raw material, coal, etc., due to shortage of means of transport. As
a result, industrial production falls and cost of production rises. In India, there are 5.2 km of
railway lines per one lakh population, as against 169 km of railway lines per one lakh
population in Canada. Besides, in India, yet all villages are not connected with all-weather
roads. The quality of roads in India is very poor in comparison to roads of developed nations.
Of the total world population, 18 percentlivesin India whereasInit
9) Pressure of Population:
land
hasjust 2.4 percent of worldarea. Thus, India, per capita availability of is very less.
in
India, growth rate of population is also very high. Because of high growth rate of population,
problems like food shortage, unemployment, etc., raise their ugly head. This pressure of
population is a great obstacle in the way of economic development.
10) Unemployment and Under-employment: India suffers from large-scale unemployment
and under-employment. In December 2017, the number of unemployed, registered in 969
employment exchanges of the country, was 4.24 crore. On account of unemployment, there
is wastage of labour power, less production, low per capita income and low rate of
investment.
(11) Lack of Capital: Capital formation plays a very important role in the economic development
of a country. In the words of Kuznets, "Low rate of capital formation is the cause of low
growth r a t e o f n a t i o n a l o u t p u t . " In 1 9 5 0 - 5 1 , a b o u t 9 per cent of gross national income was
saved. Level of investment was also the same. In 2019-20, rate of gross domestic savings was
30.9 per cent. There were many causes of low saving and low investment in India like: large
spending by the rich class on luxury goods, less banking facilities in India and lack of
nvestment opportunities, etc. In 2019-20, the level of investment increased to 32.2 per cent.
In India, capital output ratio is also high. Keeping in view the low level of economic
development, even the present rate of savings and investment is not sufficient.
(12) Under-Utilisation of Natural Resources: Although India is rich in natural resources
water, minerals and forests, etc., yet these have not been fully harnessed. Barely one-fifth of
country's water resources have been utilised. Consequently, on the one hand, agricultural
and industrial production of the country are adversely affected and on the other hand, floods
play havoc in the country. India has not been able to utilise fully its mineral wealth likeiron,
coal, petrol, mica, etc. Due to shortage of irrigation, agricultural land cannot be utilised
properly. Forest wealth has also not been fully exploited. Lack of optimal exploitation of
natural resources is one of the main factors of underdevelopment of India.
(13) Shortage of Able and Efficient Entrepreneurs: Able and efficient entrepreneurs are the
essential pre-requisites of economic development. But in India there is a geat shortage of such
entrepreneurs. Entrepreneurs here want to get rich quickly by indulging in speculative activities.
They are least interested in undertaking risks and seting up of new industries. That is why the
development of industries has not taken place in a proper manner in India.
(14) Outdated Social Institutions: Main social institutions of India, like caste system, joint
family system, law of succession, customs, religious rites, etc., are proving a hindrance to
18 Indian Economy
their influence, people do not like to abandon
economic development. Under scientific methods. The result is that modern toehmode ut-moded
methods of working, they oppose nodern techniques
are wasted.
of the country ane
not adopted and the resources
Modern economists consider labourers as a form of
(15) Low Grade Human Capital:
human capital is both cause and effect ofundordapilal
They call it human capital. Low grade
of Indian When the standard of living of the labourers of a
nature economy.
their health is poor. they are illiterate then their efficiency too becomes low. Because
is low
of l
becomes high and quality of the product becomes nooor . As
efficiency. cost of production a
result, income of the labourers remains low. In this way, they remain caught up in the vici
cious
circde of poverty.
(16) Poor Technology: It is low level of technology that prevails in most industries and in a ve
very
large sector of agriculture in India. In many industries like cotton textile, sugar, etc. old and
infenor machines are still in use. The product of these machines is not only inferior but the cost
ost
of production is also high. Consequently, our industrial products fail to compete in
international market and adversely affect our exports. In the agricultural sector, use of modern
equipments. high yielding variety of seeds, chemical fertilisers, etc., is very little. Low level of
technology accounts for low productivity and less than optimum use of resources.
(17) Dualistic Economic Structure: Indian economy is a dualistic economy. In it, two typeso
economic structures prevail (i) Highly Developed Sector: It includes export-oriented units
multinational corporations working in India, business units owned by big industrial houses
etc. This sector has very high income. Their style of working is like that of developed nations
(ii) Subsistence Sector: This sector includes agriculture, small business units, vilage
industries, etc. This sector is quite undeveloped. The income ofthis sector is very less. Mosta
the people engaged in this sector are just able to earn their livelihood. Simultaneous existence
of both these sectors in India makes it dualistic economy.
Above account endorses the view of Reddaway that "Pouverty is the mairn characteristicofIndian
economy. It is the most prominent sign of the underdeveloped nature of lIndian economy."
2. Features of Indian Economy as a Mixed Economy
According to Lord Keynes, mixed economy is one that has the merits of both capitalism and =
socialism. In this kind of economy, both public and private sectors take active part in the
economic|
development of the country. Indian economy is a mixed economy. Main features of mixed economy o
India are as follows:
(1) Public Sector: According to Industrial Policy 1991, number of industries reserved
for the
public sector is reduced to 2. These include () Atomic Energy. (ii) Railways. All other
industries are now open for private sector. Now, even among
Railways
some key
infrastructure components, viz., high speed train projects, dedicated freight lines,
mass rapid
transport system, signalling systerm, railway electrification, etc. have been opened for the
private sector.
(2) Licensed Sector: Industrial licensing provisions have been made very liberal. Now
only 5 industries are covered under licensing, i.e., one will have to obtain.licence betore
setting such industrial unit. These 5 industries are-alcoholic
defence equipments, industrial explosives and hazardous
products, tobacco producb
chemicals. All other industne
have been exempted from the provisions of industrial
licensing.
Since lIndependence
nps of Indian Economy 19
hure:
) Private Sector: Except the two industries reserved for public sector, all other industries are
opened for private sector. However, to promote the welfare of poor and middle classes and
for proper economic development of the country, the government has adopted the following
measures to control the private sector:
(i) Industries Development and Regulation Act, 1951: Under this Act, the
government controls the private sector industries in a manner that it may not be possitble
for private sector to exploit the people and the labourers for its vested interests.
(i) Development of Co-operative Sector: In order to further the economic
development of poor and middle class people, cooperative sector has been set up.
(ii) Production Reserved for Small-scale Industries: With a view to removing
unemployment and inequality in the distribution of wealth and income, special
encouragement is being given to the development of small and cottage industries.
Under policy initiatives in SSI sector in March 2014, production of 20 items was
reserved for small-scale sector. W.e.f. year 2015-16, items earlier reserved for small
scale industries have been dereserved. At present, none of the item is reserved for small
scale industries. It has been done to make SSls more competitive.
As a result of the policy of mixed economy. public sector has also played a significant role in the
ting up of many basic industries like iron and steel, machine tools, chemicals, etc. to promote economic
velopment. In1951, capital worth R 29 crore was lying invested in the public sector. It rose to 25,69,668
ore in 2018-19. Importance of public sector in Indian economy is less than the private sector. With the
option of liberal economic policy after 1991, the significance of private sector has further
increased.
naracteristics of this sector are more akin to a capitalistic economy. In the words of eminent economist
I. K.N. Raj, "Although Indian economy is a mixed economy, yet the ingredients of the mixture are
aking it conform more closely toa capitalist economy than a socialist economy."
3. Features of Indian Economy as a Planned Developing Economy or
Present Trends in Indian Economy
Under the dynamic leadership of late
Prime Minister Jawaharlal Nehru, India has adopted the
ath of economic planning in order to achieve the goal of rapid economic development. Following five
ear plans have so far been made in India:
Plans Period Plans Period
1. First Five Year Plan 1951-56 7. Seventh Five Year Plan
1985-90
2. Second Five Year Plan 1956-61 8. Eighth Five Year Plan
1992-97
3. Third Five Year Plan 1961-66 9. Ninth Five Year Plan 1997-2002
4. Fourth Five Year Plan 1969-74 10. Tenth Five Year Plan 2002-07
5. Fifth Five Year 1974-78
Plan 11. Eleventh Five Year Plan 2007-12
6. Sixth Five Year
Plan 1980-85 12. Twelfth Five Year Plan
2012-17
Progress made by the Indian economy during the period of planning is discussed as under:
()Economic Development or Increase in National Income: Increase in national income
IS an index
of economic development.
During the period prior to economic planning9
national income in India was growing
the rate of just 0.5 per cent per annum.
at
ndian
economy was therefore a stagnant economy. During the period of Five Year Plans, national
Indian Econom
20
annum at constant Fea
cent per
riceso
from th
n.
rate of 5.1 per
income has
increased at an average
of national income o
ncome was 55.9
was
2018-19, growth rate
period 1950-51 to 2019-20.
In
cent. In 2020-21, due to
per
Cotcent
national income was
3.6 per COVID
I9
2019-20. growth rate of cent. The plan-wise
in national
income is (-) 7.4 per rowth rateg
expected growth rate
national income is shown
in Table 2.
National Income at Constant Prices
Growth Rate of
Table 2. Percentage
Plans/Year % Growth of National
% Growth of National Income ome
Plans 7.8
Tenth Plan
First Plan 3.6
Eleventh Plan 7.9
Second Plan 4.1
Twelfth Plan 6.9
Third Plan 2.5
8.1
3.3 (2015-16)
Fourth Plan
7.1
5.0 (2016-17)
Fith Plan
6.9
Sixth Plan 5.4 (2017-18)
5.9
Seventh Plan 5.8 (2018-19)
3.6
Eighth Plan 6.7 (2019-20)
Ninth Plan 5.5
2020-21)
(Source: Economic Survey, 2020-21; CsO Report,
income was 7.9 per cent per annum. In
in eleventh plan, average growth rate of national
cent per annum. In recent year
twelfth plan. growth rate of national income was 6.9 per
the highest in the world.
growth rate of GDP of India and China has been
Increase in Per Capita Income: Before independence, increase in per capita income
was
(2) almost negligible; but during the period of planning, it increased at the rate of around 3 pe
cent per annum at constant prices.In the eleventh plan, growth rate of per capita income wa
about 6.5 per cent per annum. In twelfth plan, growth rate of per capita income was 5.7 pe
income 4.8 per cent. Ir
cent per annum. In year 2018-19, growth rate of per capita was
rate in per capita income was 2.5 per cent.
2019-20, growth
(3) Increase in Rate of Capital Formation: Capital
formation refers to investment ofsaving
formation plays a significant role in the economi
in productive channels. Capital
development of country. During
a the period of Five Year Plans, rate of capital formation ha
on the rate of saving and
increased appreciably. Rate of capital formation depends
rate of saving and investment has increased
investment. During the period of Five Year Plans,
1950-51, rate of capital formation was 8.7 per cent of GDP In yea
very much. In the year
GDP
2019-20, this rate increased to 32.2 per cent of
Institutional Reforms in Agriculture and Green Revolution:
Contribution of plans in
(4)
the development ofagriculture has been of two kinds: (a) land reforms and (b) technologicabi
it must
development. Although land reforms could not be implemented fully, yet
acknowledged that even limited land reforms have created a congenial atmosphere to
o
scientific cultivation. In 1966, great stress was laid on technological development
agriculture. It culminated in Green Revolution. During the period of Plans, producton
la
foodgrains has increased four-fold. In 1951-52, production of foodgrains was 550
tonnes. In 2019-20, it increased to 2,967 lakh tonnes. In 1950-51, the area under irrigauo
was 17 per cent; it increased to 49 per cent in March 2016. During the period of planning
Economy Since ndependence 21
f Indian
Firiresoflndian
rowth rate of agricultural production was 2.7 per cent per annum on the average. During
lans, agricultural production has increased very much. Per hectare production has increased
on account of application of scientific methods of cultivation, improved seeds and chemical
fertilizers
Development of lndustries: Plans have succeeded a lot in industrial sector. Basic and
(5) capital goods industries like iron and steel, machinery, chemical fertilizers, etc., have been
developed considerably in the country. Country has become almost self-sufficient in the
matter of consumer goods industhies. There has been diversification and modernisation of
industries. Industrial production capacity has increased tremendously. As a result of planning,
substantial development has taken place in industrial field. There has been tremendous
increase in the production of industrial products in the country. In short, industrial production
has witnessed considerable rise during the period of planning. In twelfth plan. industrial
production growth rate was 6.3 per cent. In year 2018-19 and 2019-20, industrial production
increased by 4.9 per cent and (1,1 per cent respectively. Reduction in growth rate of
industrial production in 2019-20 was due to COVID crisis.
6) Development of Infrastructure: Economic infrastructure mainly includes means of
transport and communication, imigation facilities and power generation capacity. During the
planning period, infrastructure has developed considerably. Power generation capacity has
increased significantly. There has been a lot of improvement in roads, railways, seaports,
airports. airways, telecommunication, banking, insurance, etc. All this has helped in
achieving faster economic growth rate.
(7) Social Services: During the period of planning, social services like education, health,
medical, family planning, etc. have also
developed appreciably. (i) Death rate in 2018
came down to 6.2 per thousand as
against 40.8 per thousand in 1951. (ii) Average
expectancy of life has gone up to 69.7 years in 2019 as against 33 years in 1951.
(ii) Many
dangerous diseases like polio have nearly been eradicated. (iv) Research: A chain of national
laboratories and research centres has been established.
(v) Education: Number of school-going
students has increased manifold. Number of
colleges, universities, professional colleges,
management institutes has increased significantly. (vi) Health: There has been
in number of good increase
C hospitals, beds, doctors, nurses, medical facilities, etc.
(8) Increase in Employment: Several measures have been taken to increase
opportunities during the period of economic planning. Government has employment
launched various
employment generation schemes in urban and rural areas. Small and
other labour intensive industries have been cottage industries and
given emphasis so as to promote employment.
(9) Modernisation:
Technological upgradation took place in almost all the areas in the
n of economic
planning. During Five Year Plans, efforts have been made for period
a research and development activities in all promoting
sectors, viz., agriculture, industries, service sector,
e
infrastructure, etc. This has led to reduction in
capital-output ratio in the economy, i.e.,
more now
production has become possible with the same amount or
of lesser amount of capital.
Modernisation of Indian industries has helped our
of to many nations economy to export its industrial products
of the world. Modernisation in
h agriculture has led to increase in agricultural
n
productivity.
g 0 Export Promotion, Diversification
and Import Substitution: During
period, exports have not planning
only significantly increased, but there has also been diversification
of exports has also
ha got ersified. Now in Feal
addilin
composition
The goods, engineering goods, je
of export
items.
products,
m a n u f a c t u r e d
Import
substitutio llery, inform
also a greal
also e x p o r t e d . achie
primary
technology
services,
etc., are
import
substitutes
iron &steel,
of iron& machinery and
our dependene
our dependence
and y evemest
fertilize
Large-scale
It has
reduced on
forei to
planning
reduced the
import
to improve
of
these items.
balance of payments
position.
countries.i h
helped During planning period
aso
Development of Science
and
lechnology:
achieved. In the
informagnilicant.
field of significant gowthe
(11)
science
and technology
has been
has been
India supplies manpower
made. Now India
made. Now
m a n p o w e r to foreign . techndg
significant progress sector. loday,
India controls mOro t
half than of the
their
information and
technology
gloh
market in IT-services.
Institutional Changes:
Many positive structural and inct
(12) Structural
and
planning period.
It includes expansion of
blic n change
sect
introduced during ec
have been public oution
distributio system, developmo
development
introduction of price
support system,
tion and privatisatinn is also
liberalisation, globalisation privatisation
financia
anc
Adoption of
a p
institutions., etc.
institutional and structural
change.
Fluctuations: There are erona as
less economic fluctuations in the
(13) Less Cyclical confronted with situations lio
Economy is less boom
result of economic planning.
over-production, etc. Economic planning is instrumental i
depression, unemployment,
economic stability. All economic activities are properh
bringing about and maintaining for
coordinated. po
Needs: Economic planning leads to need-oriented producticr tele
(14) Production According to
the planning authority formulates the plan.
of goods and services. In economic planning,
coordinates the human and physical resources in such a manner that resources ar
natural, 65
of the economy.
properly utilised and result in production according requirements
to Inc
to be achieved in a balance cen
(15) Balanced Economic Growth: Economic growth sought
is
ds
manner by the planning authority. It aims at securing
balanced regional and sectoral growth
There are several advantages of balanced growth, such as, agricultural development, prope
industrialisation, reduction in poverty, increase in demand of goods or services of one sector
inc
the persons of other sectors, etc.
(16) Right Use and Conservation of Natural Resources: Government ensures propf thes
and conservation of natural resources under economic planning. While making use
ed for the
scarce resources, it is ascertained that there is least possible wastage. These are use
benefit of the entire society and not a particular class. Use of minerals such as coal, ol
made keeping in view only the present but also the future generation.
not
In short, India has undoubtedly made dof planing
The country has succeeded in
perceptible economic progress during the p r g e n e r a b o r
laying the foundation of growth in the field of sperityofthi
multipurpose projects and industrterosDerity
agricultural production. A super structure for the comiort a oft
poor people can easily be constructed on
this dependable foundation.
4 . Dualistic Nature
of Indian Economny
Dualistic nature of economy refers to presence of two different types of economic
ions of soce
cond
technological levels and social sections. Wide inequalities prevail in these
o fsociety
types of dualism two
prevailing in India are as follows:
Economy Sinoe
Indepvendence 23
af lndian
F o a t u r e so fl I n d i a n
s
ialism:
(1) Economic Dual In this type of dualism, Indian economy is divided in two sectors. One
sector of the economy is a subsistence sector where people work just to earn their livelihood.
tinchudes agriculture, small business units and village industries. People working in this
and their standard is low. The other sector of the Indian economy is
cector are generally poor
includes large business units and modern enterprises. People working in
highly developed. It
rich and enjov good standard of living. Employees working in this sector get
this sector are
good salaries.
Dualism: In one sector of the Indian economy, outdated and traditional
)Technological
technology is used for production. People working in this sector are backward. They do not
The other of the economy uses innovative and
sector
want to adopt moderm techniques.
of this sector even import latest
modern methods of production. The entrepreneurs
technologv from other countries.
Dualism: In India, one highly traditional, having much
section of society is
3) Sociological
are highly immobile, and are not
faith in customs, traditions, superstitions, etc. These persons
educated, ambitious
ambitious. The other section of Indian society is very forward, highly
about caste, outdated traditions,
and mobile. People of this section are less concerned
customs, rituals and superstitions.
5. Sectoral Distribution of Indian Economy
economy is divided in three main sectors: (1) Primary
Sector: It includes agriculture,
Indian
dairy. quarying, etc. (2) Secondary Sector: It includes manufacturing
sector, construction
farestry,
like banking, insurance,
etc. (3) Tertiary Sector/Service Sector: It includes services
nouer generation,
intormation technology, warehousing, trading, etc.
telecommunication,
sector in their national income is generally around
In developed countries contribution of tertiary
sector is around 30 per cent and of primary sector is around 5 per cent.
In
65 per cent, that of secondary
sector was quite dominating. In the year 1950-51, it was 61 per
India. earlier the contribution of primary
oent of total national
income. This indicates underdevelopment of our economy. Now sectoral
distribution of national income is changing in favour of tertiary sector. In the year 2019-20, share of
sector 27.2 per cent, while share of
tertiary sector in national income was 55.6 per cent, that secondary
of
primary sector came down to 17.2 per
cent. It is a favourable change in sectoral distribution of national
income. Thus, now the growth of our economy is led by tertiary sector.
Questione
1.Essay Type Questions
1. What are the main characteristics of Indian economy?
2. Discuss the basic features of Indian economy and state to what extent these have ben
responsible for the slow growth rate of our economy.
3. On what basis Indian economy is called underdeveloped?
"
Discus.
Indian economy has all the major characteristics of economic under-development.
G i v e the main features of Indian economy. Is India still an underdeveloped economyr
.Explain the main features of Indian economy. Also discuss the present direc:
Indian Econom
cconomy. tion of Ind
7. Outline various economic problems of Indian economy. Compare and contrast
problems of 1950's with that of present scenario.
ast the economi
onomiy
S. Discuss the main features of mixed economy. How do you view its future in India i in India in the
economic policy of 1991? light
9. ls Indian econonmy a developed economy or developing economy?
10.Discuss the nature of Indian econonmy.
11. Why is Indian economy called mixed economy?
I . Short Answer Type Questions
1. Explain the nature of Indian economy.
2 Explain Indian economy as a mixed economy.
3. Is India a developing country or developed country?
Analyse the main characteristics of Indian economy as an
underdeveloped economy.
5. What is mixed economy?
6. Describe the main
problems of Indian economy.
7. What are the main features of Indian
economy?
8. Explain why India chose mixed
economic system and has it been a success? Discuss.
9.
Highlight the structural changes a country attains in its economic
development process.
l . Objective Type Questions and
Which of the following feature
their Answers
of Indian economy reflects that it is an underdeveloped economy?
(a) Low per capita income
(b) Excessive dependence on agriculture
(c) Large scale unemployment (d) All of these
2. Percentage share of agriculture in national income has been in India.
(a) Increasing (b) Decreasing
(c) Unchanging (d) Negative
3. Some entrepreneurs want to get rich quickly by indulging in
(a) Speculative activities (b) Banking activities
(c) Agriculture (d) Wage employment
4. Indian economy is
(a) Developed economy (b) Mixed economy
(c) Socialistic economy (d) None of these
5. Which of the following is an index of underdeveloped nature of Indian economy?
(a) Low per capita income (b) Democratic planning
(c) Mixed economy system (d) None of these
6. Indian economy is characterised dualistic
by nature.
7. Capital formation has
(True/False)
no role in increasing growth rate of economic
development.
Ans. 1. (d), 2. (b), 3. (a), 4. (b), 5. (a), 6.
(True/False)
True, 7. False.
