Indian Economy

Characteristics of Indian Economy

By Examguru / 28 Sep, 2023 / Download PDF

Characteristics of Indian Economy

The Indian economy is a complex and dynamic system shaped by its agrarian roots, growing industrial base, and expanding service sector.

As a developing nation, India presents a unique mix of tradition and modernity, with both public and private sectors contributing to economic activities.

With ongoing challenges like poverty, unemployment, and low per capita income, the country continues to pursue inclusive growth and sustainable development.

Key Features and Aspects of the Indian Economy

1. Agrarian Economy:

  • Even after seven decades of independence, agriculture plays a vital role in India’s economy.

  • 54.6% of the population is engaged in agriculture and allied activities (Census 2011), and according to' INDIA 2021, it contributes 17.8% to the country's Gross Value Added for the year 2019-20 (at current prices).

2. Mixed Economy:

  • The Indian economy is a unique blend of public and private sectors, i.e., a mixed economy.

  • After liberalization, the Indian economy is going ahead as a capitalist economy or market economy.

3. Developing Economy:

The following facts show that Indian Economy is a developing economy:

  • National Income, According to the press note released on 31st August 2022 by the National Statistical Office (NSO), Ministry of Statistics and Programme Implementation, the estimates of GDP for the April-June quarter (Q1) of 2022-23 are

    • Real GDP, or Gross Domestic Product (GDP), at constant (2011-12) prices in Q1 2022-23 is estimated to attain a level of Rs. 36.85 lakh crore, as against Rs. 32.46 lakh crore in Q1 2021-22, showing a growth of 13.5 % as compared to 20.1 % in Q1 2021-22.

    • Nominal GDP, or GDP at current prices in Q1 2022-23, is estimated at Rs. 64.95 lakh crore, as against Rs. 51.27 lakh crore in Q1 2021-22, showing a growth of 26.7% as compared to 32.4 % in Q1 2021-22.

  • The level of unemployment is very high. Unemployment in India is mainly structural in nature because the productive capacity is inadequate to create a sufficient number of jobs.

  • There is an acute problem of disguised unemployment in the rural areas. A person is considered employed if he/she works for 273 days of a year for eight hours every day.

  • Savings are low in India due to low national income and high consumption expenditure. The low savings results in a shortage of capital formation. Capital is an important factor of production.

  • India is the second most populated country in the world. During 2001-2011, population increased by 17.69%.

  • With this high growth rate of population, about 1.83 crore new persons are being added to the Indian population every year.

  • According to the 2011 census, the total Indian population stands at a high level of 121.07 crore, which is 17.5% of the world's total population.

  • To maintain 17.5% of the world population, India holds only 2.42% of the total land area of the world.

India lacks large industrialization based on modern and advanced technology, which fails to accelerate the pace of development in the economy.

Important facts relating to characteristics of Indian Economy

  • The primary sector of the Indian economy is agriculture and the related sectors.

  • Secondary sector of Indian Economy is related to industry, manufacturing, electricity, etc.

  • The tertiary sector of the Indian economy is related to business, transport, communication, and services.

  • The best indicator of economic development of any country is per capita income.

The following factors are important in the economic development of a developing country:

  1. Natural resources

  2. Capital gain

  3. Skilled labour force

  4. Surplus sale of agriculture

  5. Justified social organisation

  6. Political freedom

  7. Freedom from corruption

  8. Technological knowledge and general education

Wholesale Price Index

Wholesale Price Index (WPI) measures the average change in the prices of commodities fo r bulk sale at the level of early stage of transactions. The index basket of the WPI covers commodities falling under the three major groups namely primary articles, fuel and power and manufactured products.

Poverty in India

  • Poverty estimates are derived from household consumption data. The World Data Lab monitors global poverty using advanced statistical models.

Measuring Poverty in India

  • In India, the first official rural and urban poverty lines at the national level were introduced in 1979 by the Y.K. Alagh Committee, and official poverty counts began for the first time.

  • Later, in 1993, the D.T. Lakdawala Committee extended these poverty lines to states and over time allowed official poverty counts over time and in the states.

  • In 2005, recognizing that the rural poverty line was too low, the government appointed the Tendulkar Committee to take a fresh look at the poverty lines. Reporting in 2009, the Tendulkar Committee revised upward the rural poverty line.

  • Continued media criticisms led the government to appoint the Rangarajan Committee in 2012. Reporting in June 2014, the committee recommended raising further both the rural and urban poverty lines. A decision is yet to be taken on the Rangarajan Committee recommendations.

  • Therefore, the Tendulkar poverty line remains the official poverty line and is the basis of the current official poverty estimates in 1993-94, 2004-05 and 2011-12.

[Source: NITIAayog]

World Bank updated Internaitonal Poverty Line

The World Bank updated the global poverty lines in September, 2022. The decision was announced in May 2023 follows the releave in 2020 of new purchasing power paritties (PPPs)-the main data used to convert different currencies into a common, comparable unit and account for price differences across countries. The new extreme poverty line of $2.15 per person per day, which replaces the $1.90 poverty line is based  on 2017 PPPs.

The new global poverty lines of $2.15, $3.65 and $6.85 reflect the typical national poverty lines of low -income lower-midlle-income and upper-middle-income countries in 2017 prices. New nowcast estimated at the US $2.15 poverty line is available since October 2022.

Multidimensional Poverty

  • Using the NFHS-4 (2015-16) report, in line with the global Multidimensional Poverty Index (MPI), NITI Aayog prepared the Multidimensional Poverty Index at the national level for all states and districts of India.

  • It will enable measuring deprivation across twelve indicators at the national, state, and district levels. In 2015-16, 25% of households were found to be multidimensionally poor in India.

  • Since the MPI index is based on NFHS-4 data from 2014-15, it may serve as the baseline for measuring deprivation in future studies.

[Source: MOSPI]

BPL: According to the Rangarajan Committee, 30.95% of people in rural areas and 26.4% in urban areas (as compared to 25.7% and 13.7%, respectively, as per the Tendulkar Methodology) were below the poverty line in 2011-12. [Source: The IE, 4 July, 2015 and ES2015-16]

Around 22% of Indians live below the poverty line. Out of the total population living in the rural parts of the country, 25.7% of them are living below the poverty line, according to RBI. In the urban areas 13.7% of the population is living below the poverty line. [Source: Financial Express (FE), 21st  Sept, 2019] 

National Multidimensional Poverty Index 2022

Key Facts

According to the 'National Multidimensional Poverty Index: A Progress Review 2023' report recently released by NITI Aayog a record 13.5 crore people were freed from multidimensional poverty during the period 2015-16 to 2019-21. According to the Report, the number of multidimensional poor in India fell from 24.85% in the year 2015-16 to 14.96% in the year 2019-21, which is a significant decline of 9.89% points. During this period poverty in urban areas declined from 8.65% to 5.27%, while poverty in rural areas declined fastest from 32.59% to 19.28%.

Various Committees on Poverty in India

Since India's independence, six official committees have been formed to estimate the number of people living in poverty in the country.

★ Planning Commission Working Group (year 1962)

★ VM Dandekar and N.Rath (year 1971)

* Separate Committee (year 1979)

Lakdawala Committee (year 1993)

Tendulkar Committee (year 2009)

Rangarajan Committee (year 2014)

Poverty Rate in India

India's headline poverty rate stood between 4.5% and 5.0% 2022-23. The latest HCES results were released after over a decade on February 24, 2024.

The study by the State Bank of India, which is based on the latest Household Consumption Expenditure Survey HCES: 2022-23, showed that rural poverty declined to 7.2% in 2022-23 from 25.7% in 2011-12. Meanwhile urban poverty declined to 4.6% from 13.7% during the same period.

More Related Articles

Indian Economy Report 2024

Highlights of the Indian Economy National Statistical Office (NSO) Report According to the Press Note released by the National Statistical Office (NSO) on 29th February, 2024 Ministry Acco

examguru by ExamGuru

Economic Growth & Economics

Economy It is the state of a country or region in terms of the production and consumption of goods and services and the supply of money. Types of Economy Depending upon the dominant view

examguru by ExamGuru

Agriculture and Land Development

Agriculture and Food Management The agriculture sector, which is the largest employer of workforce, accounted for a sizeable 18.8 % (2021- 22) in Gross Value Added (GVA) of the country registeri

examguru by ExamGuru

National Income

National income is the measurement of flow of services and goods in economic system. Comparison between National income with National wealth: The national wealth is the measurement of present ass

examguru by ExamGuru

Economic Planning and Development

Economic Planning is the process by which the limited natural resources are used skillfully so as to achieve the desired goals. The concept of Economic Planning in India is derived from Russia (th

examguru by ExamGuru

Unemployment and Employment (Programmes and Schemes)

In common parlance anybody who is not gainfully employed in any productive activity is called unemployed. However, it can be of two kinds- 1. voluntary unemployed and 2. involuntary unemployed. Her

examguru by ExamGuru

Trade and Commerce

Indian Trade was extremely developed during ancient time. After the British East India Company was established in 1600, the trade between India and Britain was in India's favour till 1757. At

examguru by ExamGuru

New Economic Policy

New Economic Policy is related to economic reforms. Its aim is to bring about reforms in production pattern, to obtain new technology and to use full capacity expeditiously and in toto. The New E

examguru by ExamGuru

Indian Financial System

Indian Financial System is a system in which People, Financial Institutions, Banks, Industrial Companies, and the Government demand funds, and the same is supplied to them.   The Indi

examguru by ExamGuru

Indian Fiscal System

Fiscal System: It refers to the management of revenue and capital expenditure finances by the state. Hence, fiscal system includes budgetary activities of the government that is revenue raising, bo

examguru by ExamGuru

Toppers

anil kumar
Akshay kuamr
geeta kumari
shubham