Characteristics of Indian Economy
as Developing economy
(UNIT-1)
Meaning of Developed & Developing Economy
In general those countries which have real per capita
incomes less than a quarter of the per capita income of
the US are underdeveloped countries.
World Bank in its report classified the various countries
on the basis of GNI(Gross National Income)
Low Income Countries : US $ 1005 or less
Middle Income Counries : US$ 1006 to $ 12275
High Income Countries : US$ 12276 or above
Developed Countries include High income countries which
account for 16% of world population with 80% of world income.
Developing Countries include Low and Middle Income countries
which account for 84% of world population with 20% of world
income.
Characteristics of Indian
Economy
A) Low per Capita Income: According to United
Nations Development Programme’s, in 2013, India is
ranked 127th among 187 countries. The report says 53
per cent of Indians suffer from multidimensional
poverty. PCI of India in 2012 was $ 3285 barring a few
countries. Per capita of Indian people is one of the
lowest in the world. It has increased in 2015 to $ 6101.
It shows that India’s pr capita income is rising.
B) Inequalities in Income distribution: Inequality in
distribution of income and wealth is found in every
country but this is wider in underdeveloped
economies. In India bottom 40% of rural population
possess only 5% of rural assets while 8% top
households possess 46% of total rural assets. This
disparity is more intensive in urban areas.
C) Heavy population pressure: India suffers with the
problems of High Population Growth, High Illitracy
rate, High Employment and High rate of poverty. High
rate of growth of population means need for more
population to be fed, clothed & provided other
necessary goods year after year.
D) Predominance of Agriculture: In India agriculture
and allied sectors contribute nearly 14.2 percent of
Gross Domestic Product (GDP) according to the 2010-
11 estimates released by the Central Statistics Office
(CSO). Moreover, in India agriculture provides
employment to around .50 per cent of the workforce.
E) Low rates of capital formation- Another basic
characteristics of Indian economy is existence of capital
deficiency which is reflected in 2 ways-
Rate of savings is very low.
Ineffective financial resources mobilisation
It becomes the reason of low Capital Formation.
Lack of capital does not allow an economy to
introduce the latest technologies. Thus, economy
becomes technologically backward and internationally
in competitive.
F) Improvement required in Infrastructure: It
includes transport facilities, energy production,
educational system, health facilities etc. The
Indian road network is now one of the largest in
the world. India is having metro rail for the daily
transportation. But India is facing energy crisis.
Since independence Education has not expanded
at desired rate. Nation needs to take actions for
improvement in Education and health system
also.
G) Poor quality of human capital- Human
capital means the quality of labour force i.e. how
healthy, trained, educated, devoted & efficient
are workers in a country. These are the reasons:
*Illiteracy & high Poverty rate
* Regional and Gender Inequality
*Investment in education, skill formation, health,
moral education make workers
trained ,educated and efficient which is low
According to the UNDP Global Human
Development Index (HDI) 2011, India ranked
134th among 187 countries.
H) Prevalence of low level of technology-
In an underdeveloped economy like India modern
techniques of production exists side by side with
primitive techniques. But major part of output is
produced with old and obsolete techniques of production.
New techniques are expensive and require skills for their
application in production which requires availability of
capital and training adequate number of personnel. Even
India does not have own Research & Development in
technology which leads to import of obsolete technology.
Also in India majority of farmers are too poor to buy even
the basic inputs such as improved seeds, pesticides and
insecticides.
The rate of technological growth in India ha been
between 0.7 and 1.1 percent, whereas in other
economies a comparable rate of technological growth of
2.05 to 3 percent would have been achieved.
I) Dependence on Imports: The country hasto heavily
depend on imports. Armed forces of the country also
depended on foreign imports. Moreover, several
consumer goods like sewing machines, medicines, oil,
mobile, cosmetics etc. are imported from abroad.
J) Social Peculiarities: High illiteracy rate, male
dominated society, joint family system, lack of
entrepreneurship, castism, widespread child labour,
etc. are some characteristics of Indian society which
distinguish it from developed societies.
Indian Economy-developing
Upward trends in National Income & Per
capita Income
Improvement in Infrastructure
Level(Telecom, Flyover, Bridges, Railways,
Transport)
Progress in the banking and financial sector
Increase in Education rate
(refer notes sent separately)
From all the above mentioned features of
Indian Economy, it is being shown that India
is a developing economy which is on the path
of development.
