The Indian Economy is growing at a faster pace than the rest of the economies of the world but it still has scope for improvement by making effective policies that could be helpful in the future. In this article, we discuss the important features of the Indian economy. Indian economy is one of the important sections for the upcoming exams like SSC, Railways, Banking, and others. Students need to read the topic carefully.
Important Features of the Indian Economy:
1. Low per capita income
- India is known worldwide as a country with low per capita income. Per capita income is defined as the ratio of national income to overpopulation. This may not reflect each individual’s actual income, but shows her average annual income for an Indian citizen. From 2012 to 2013 her per capita income in India is estimated at 39,168 i.e about 3,264 per month.
- Comparing India’s per capita income with the rest of the world shows that India lags far behind many other countries. For example, her per capita income in the US is 15 times higher than that in India, while her per capita income in China is more than three times higher than that in India.
2. Intense Demographic pressure
- India ranked 2nd in the world after China in terms of population. According to the 2011 census, India’s population exceeds 1.21 billion. Between 1990 and 2001 she increased by 1.03%. A major reason for India’s rapid population growth is its sharp decline in mortality, but not so rapidly in its fertility rate.
- The mortality rate is defined as the number of people who die per 1000 population and the fertility rate is defined as the number of people who give birth to one child per 1000 population.
In 2010, the birth rate was 22.1 per 1,000 population, but the death rate was only 7.2 per 1,000 population. It is a sign of development. Low mortality reflects a better public health system. However, the high birth rate is a problem because it directly affects population growth.
- After 1921, India’s population grew rapidly. This is because fertility rates have fallen very slowly and mortality rates have fallen very quickly. The birth rate dropped from 49 in 1921 to 22.1 in 2010, and the death rate dropped from 49 to 7.2 over the same period. Therefore, India’s population growth is very rapid.
- Severe demographic pressure is a major concern for India. Public funding is strained to mobilize sufficient resources to provide public education, health care, infrastructure, and more.
3. Poverty and Inequality
- About 269.3 million people lived in poverty in India from 2011-2012, according to the Indian government. This was about 22% of India’s population. A person is said to be poor if he cannot consume the amount of food required to reach the minimum calorie count of 2400 in rural areas and 2100 in urban areas. For this, you have to earn the necessary amount of money to buy groceries.
- The government also estimates the required amount to be $816 per person per month in rural areas and $1000 in urban areas. This equates to around €28 in rural areas and around €33 per person per day in urban areas. This is known as the poverty line. This means that his 269.9 million in India earned a meager income from 2011 to 2012.
- Poverty is closely related to inequality in the distribution of income and wealth. Few people in India own physical assets, but the majority have little or no assets in the form of land, houses, fixed deposits, company shares, savings, etc. Only the top 5% of households control about 38% of India’s total wealth, while the bottom 60% of households control only 13% of the wealth. This shows that economic power is concentrated in very few hands.
- Another issue related to poverty is unemployment. One of the main reasons for India’s poverty is the lack of employment opportunities for all workers in the country. The workforce includes adults willing to work. If not enough jobs are created each year, the problem of unemployment will increase.
- In India, large numbers of people are joining the workforce each year due to population growth, a few more educated people, and the lack of expansion of the industrial and service sectors at the required rate.
4. Agriculture-centric economy
- Most of India’s working population depends on agriculture for their livelihood. In 2011, about 58% of India’s labor force was engaged in agriculture. Nevertheless, agriculture accounts for just over 17% of India’s gross domestic product.
- A major concern for Indian agriculture is the very low productivity of this sector. The land has strong population pressure to feed a large number. Due to rural population pressure, the available land area per capita is very small and there is no benefit to obtaining higher yields.
- Second, less land is available per person, forcing the majority of people to become low-paid agricultural laborers.
- Third, Indian agriculture suffers from a lack of better technology and irrigation facilities.
- Fourth, Indian people, who have no education or training, work in agriculture. Therefore, it is one of the reasons for the decline in agricultural productivity.
5. Higher rate of formation of capital
- One of the major problems of the Indian economy at the time of independence was the lack of capital stock such as land and buildings, machinery and equipment, and savings. For the economic activities of production and consumption to continue to circulate, we must use a certain ratio of production, savings, and investment.
- However, during the first 40 to 50 years of independence, the required quota was never met. The main reason is the high consumption rate of essentials by the people, especially by poor and middle-income groups. As a result, collective household savings were very meager. The consumption rate of durable goods was insignificant But things have changed in the last few years.
- Economists calculated it to support the growing population India should invest 14% of its GDP. It is encouraging to see India’s savings rate of 31.7% in 2011. This was made possible because people were saving in banks, being able to spend on durable goods, and being heavily invested in public works and infrastructure.
6. Planned economy
- India is a planned economy. The development process continued throughout his five-year plan from 1951 to his first planning period in 1956. The benefits of planning are well known. Through planning, the country first establishes priorities and provides financial estimates for achieving the same.
- Therefore, efforts are being made to mobilize resources from various sources at a minimal cost. India has already completed 12 five-year planning periods. After each plan, a review is conducted to analyze successes and shortfalls. Therefore, the following plans are improved.
- Today, India is experiencing economic growth and is widely recognized as a future economic powerhouse. India’s per capita income is growing faster than ever before. India is considered a large market for various products. All this is possible due to planning in India.
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