COMPOSITION AND STRUCTURE OF INDIAN ECONOMY
INDIAN ECONOMY AT TIME OF INDEPENDENCE
At the time of Independence, Indian economy was under-developed, there was low per-capita income, poor infrastructure, illiteracy, it was mainly dependent on agriculture and there was no industrial development, it was dependent on imports. Apart from these Indian economy was semi feudal, depreciated, stagnant. India suffered from capital deficiency, high population growth, famines, unemployment, economic disparities and lots more.
INDIAN ECONOMY IS DEPENDENT ON AGRICULTURE
In India, the agricultural sector occupies a vital position in the overall economy of the country as would be clear from the following:
Share of Agriculture in National Income:
Agriculture has got a prime role in the Indian economy. Though the share of agriculture in national income has come down, still it has a substantial share in GDP. The contributory share of agriculture in Gross Domestic Product was 55.4 percent in 1950-51, 52 percent in 1960-61 and is reduced to 18.5 percent only at present. The share of the agricultural sector’s capital formation in GDP has declined from 2.2 percent in the late-1999s to 1.9 percent in 2005-06.
Important Contribution to Employment:
The agriculture sector, at present, provides livelihood to 65 to 70 percent of the total population. The sector provides employment to 58.4 percent of country’s workforce and is the single largest private sector occupation.
Important Source of Industrial Development:
Various important industries in India find their raw material from agriculture sector -cotton and jute textile industries, sugar, vanaspati, etc. are directly dependent on agriculture. Handlooms, spinning oil milling, rice thrashing, etc. are various small scale and cottage industries, which are dependent on the agriculture sector for their raw material. This highlights the importance of agriculture in industrial development of the nation.
Importance in International Trade:
India’s foreign trade is deeply associated with the agriculture sector. Agriculture accounts for about 14.7 percent of the total export earnings. Besides, goods made with the raw material of agriculture sector also contribute about 20 percent in Indian exports. In other words, agriculture and its related goods contribute about 38 percent of total exports of country.
In short, agriculture occupies a central place in the Indian economy. Its performance sets the pace of growth in the economy as a whole. It should, however, be noted that Indian agriculture is still in the state of backwardness, the per capita productivity in agriculture is less than in industry.
INDIAN ECONOMY IS DUAL ECONOMY
Indian economy exhibits coexistence of traditional and modern sector in agriculture and in industries. Well, in other words, Indian economy having the character of developing and developed economy both. We can see traditional areas are labour intensive while some modern areas are technological intensive.In India having lacs of cottage industry and at same time country is performing very well in the development of heavy industries.
INDIAN ECONOMY IS MIXED ECONOMY
In a mixed economy , private and public sector go side by side .the government directs economic activity in some socially important areas of the economy, the rest being left to the price mechanism to operate. Before independence, the Indian economy was laissez-faire. No, we opt mixed economy pattern. It is clear from above argument that our economy is mixed.
Co.existence of public and private sector
The coexistence of large public sector with big private sector has transformed the economy intothe mixed one .
The industrial policies of 1948 , 1956 formulated by governmnet have made provision for such coexistence .some basic and heavy industries are being run under the public sector ,however, with the liberalization of the indian economy ,the scope of the private sector has further enhanced .Infact public sector never contributed more than 20% of GDP .so still more space for the private sector .
INDIAN ECONOMY IS UNDERDEVLOPED ECONOMY
An underdeveloped economy is defined as an economy which has got unexploited natural resources and unutilized human resources. In other words, it is an economy, having a potentiality to grow. An underdeveloped economy shows the following features:
(a) In the underdeveloped countries, natural resources remain unexploited and underexploited due to various reasons. Systematic utilisation of natural resources alone can lead to -economic development.
(b) An underdeveloped country is basically a primary producing country, engaging its factors of production to produce only raw materials and foodstuffs. The percentage of the population engaged in. the agricultural sector is very high (70% in the Indian context) and a major part of total national income comes from agriculture and activities allied to agriculture (around 30% in India).
(c) In the case of UDCs, the scarcity of capital is both the cause and effect of low productivity and underdevelopment. Due to the scarcity of capital, a better technique of production cannot be adopted in India due to undeveloped technology total volume of production and productivity is low. Due to low production and productivity, the level of income is less, and consequently, less amount of capital is available to adopt the better technique of production. Thus, poverty is both the cause and the consequence.
(d) A chief feature of an UDC like India is its high population pressure. The high birth-rate and low death-rate are responsible for a break-neck rise in Indian population. At present, the annual growth rate of population according to 2001 census stands at 2.13%. This rapid growth of population stands as an obstacle in the smooth development of the economy.
(e) UDCs are characterized by low per capita income and grinding poverty scenario. In India, the per capita income is less than 1/3 of the per capita income of the developed western countries, and, according to the revised estimate of the Planning Commission about 50% of the total populations in India live below the poverty line.
(f) The underdeveloped countries are also characterized by widespread unemployment, underemployment and disguised unemployment. In India large numbers of people engaged in the agricultural sector are underemployed or disguisedly unemployed, apart from the large number of white- coloured unemployed, existing in the register of Employment Exchanges.
(g) The underdeveloped economies are also backward in the field of human resources. In these countries, the quality of people as productive agent is very low. There is low labour efficiency, lack of entrepreneurship and economic ignorance. People being illiterate are guided by blind beliefs, customs and traditions. People become fatalists and believe that man’s fortune is decided by fate and not by one’s own efforts.
(h) In these economies, there is a lack of infrastructural facilities like transport, banking, health, power, education and information technology. People also adopt an outdated technique of production which results in low productivity
INDIAN ECONOMY IS DEVELOPING ECONOMY
Developing stands for the beginning of the process of development .after independence indian econmoy witnessed lots of positive changes .
The changes in quantitative and structural form .
QUANTITAIVE : suggest the idea of econmoic growth that means change in national income , per capita income, increase the value of world trade etc.
STRUCTURAL : suggest the idea of econmoy development , we can see changes in infrastructure , education level , health indicator etc .
India is rated as one of the top economies in the world in terms of purchasing power parity (PPP) of the gross domestic product (GDP) by leading financial entities of the world, such as the International Monetary Fund.
As far as agriculture is concerned, India is the second largest in the volume of output. Certain related sectors of agriculture have played a major role in the development of the Indian economy by providing employment to a number of people in the forestry, fishing and logging industries.
India is regarded as the 15th best economy in terms of production in the services sector. A sizeable amount of the Indian workforce is also employed by the service sector. In the ten-year period between 1990 and 2000, the rate of growth has been 7.5%, up from 4.5% during the 30-year period from 1951 to 1980.
Verticals, such as information technology (IT), software development, call centers, IT outsourcing, Business Process Outsourcing (BPO) and other IT-enabled services, have been the biggest contributors in the services sector of the Indian economy.
Based on the above observations , we can conclude that indian economy is a developing economy and is moving forward on various parameters of development .
ECONOMICS LECTURE -2
IAS NEXT :BEST COACHING FOR IAS PCS & PCSJ