What are the basic characteristics of Indian Economy?

indian economy is an under developed economy in which Agriculture is the back bone of Indian
economic. 60% of Indias population are on the below poverty line. Mineral resources are not
fully utilized. We are selling iron ore by trucks and getting blades by packets. Majority of the
people of India are leading a poverty line. Indian economic is affected by it. Countries which are
on the part of progress and which have their potential for development are called developing
economic. So India is termed as developing economic by modern views.

The important features of Indian economic:

1. Low per capita income:
Under developed economy is characterized by low per capital income. India per capital income is
very low as compared to the advanced countries. For example the capital income of India was 460
dollar, in 2000. Where as their capita income of U.S.A in 2000 was 83 times than India. This
trend of difference of per capita income between under developed and advanced countries is
gradually increasing in present times. India not only the per capita income is low but also the
income is unequally distributed. This mal-distribution of income and wealth makes the problem
of poverty in ore critical and acute and stands an obstacle in the process of economic progress
2. Heavy Population Pressure:
The Indian economy is facing the problem population explosion. It is clearly evident from the
total population of India which was 102.67 cores in 2001 census. It is the second highest
populated country China being the first. Indias population has reached 110 cores. All the under
developed countries are characterized by high birth rate which stimulates the growth of
population; the fast rate of growth of population necessitates a higher rate of economic growth to
maintain the same standard of living. The failure to sustain the living standard makes the poor and
under developed countries poor and under developed.
3. Pre-dominance of Agriculture:
Occupational distribution of population in India clearly reflects the backwardness of the economy.
One of the basis characteristics of an under developed economy is that agriculture contributes a
very large portion in the national income and a very high proportion of working population is
engaged in agriculture
4. Unemployment:
There is larger unemployed and under employment is another important feature of Indian
economy. In under developed countries labor is an abundant factor. It is not possible to provide
gainful employment the entire population. Lack of job opportunities disguised unemployed is
created in the agriculture fields. There deficiency of capital formation.
5. Low Rate of Capital Formation:
In backward economics like India, the rate of capital formation is also low. capital formation
mainly depends on the ability and willingness of the people save since the per capita income is
low and there is mal-distribution of income and wealth the ability of the people to save is very
low in under developed countries for which capital formation is very low .
6. Poor Technology:
The lever of technology is a common factor in under developed economy. India economy also
suffers from this typical feature of technological backwardness. The techniques applied in
agriculture industries milling and other economic fields are primitive in nature.
7. Back ward Institutional and social frame work:
The social and institutional frame work in under developed countries like India is hopelessly
backward, which is a strong obstacle to any change in the form of production. Moreover religious

institutions such as caste system, joint family universal marriage affects the economic life of the
people.
8. Under utilization of Resources:
India is a poor land. So our people remain economically backwards for the lack of utilization of
resources of the country.
9. Price instability:
Price instability is also a basis feature of Indian economy. In almost all the underdeveloped
countries like India there is continuous price instability. Shortage of essential commodities and
gap between consumption aid productions increase the price persistently. Rising trend of price
creates a problem to maintain standard of living of the common people.
Indian economy is an underdeveloped economy because almost all important features of an
underdeveloped economy arc still present in Indian economy. Some of these features are
discussed below:
1. Low Income:
In India GNP (Gross National Product) per capita was $1,180 in 2009 at current prices, roughly
one third of the population is below the poverty line. On world scale, income inequalities between
the developed and underdeveloped countries arc very large.
According to the World Hank estimates, in 2009 the average GNP per capita of the high income
economies was $38,139 whereas it was $503 in low income underdeveloped countries.
2. 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.
The share of income in agriculture is however, considerably less than the share of employment in
agriculture which clearly reflects the relatively low productivity per labour unit in the agricultural
sector.
3. Rapid Population Growth Rate and High Dependency Ratio:
High population growth rate is also an indicator of underdevelopment. Indias population growth
rate was 1.93% per annum and 21.34 % per decade during 1991-2001, which is still very high as
compared to developed economies. Dependency ratio refers to ratio of dependent population
(non-working) to total population. In India dependency ratio is around 60% which is very high.
This is because of high birth rate and social circumstances.
4. Mass Poverty:
According to United Nations Development Programmes (IJNDP) Global Human Development
index 2011. India is ranked 134th among 187 countries. The report says 53 per cent of Indians
suffer from multidimensional poverty. The Planning Commission released the second India
Human Development Report (HDR) 2011.
The report claims that poverty, unemployment and child labour are declining. According to this
report the absolute number of the poor (27 per cent) stood at 302 million as compared to 320
million in 1973. Poverty is widespread in the underdeveloped countries, liven though major
progress has been registered over the past 25 years, the absolute number of poor has in fact
increased.
5. Unemployment and Underemployment:
Unemployment is a phenomenon of all economies whether developed or underdeveloped. But
nature and degree of unemployment is different in developed and underdeveloped economies.

In developed economics most of the unemployment is cyclical which arises because of

fluctuations in business cycles. In underdeveloped economies like India, chronic unemployment
is found which results from the structural defects in the economy.
Moreover, underemployment is widespread in underdeveloped countries. Underemployment is a
condition in which a person is getting work but not according to his/her capacity and
qualifications.
The 64th round (2007-2008) of NSSO survey on employment- unemployment indicates a creation
of 4 million work opportunities between 2004-05 and 2007- 08. The Eleventh Five Year Plan
aims at generating 58 million work opportunities in twenty- one high growth sector.
6. Inequality:
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.
7. Scarcity of Capital:
Capital is considered as the most important factor in the development of an economy. In
underdeveloped economies like India, capital availability per person is very low which results in
low productivity and low per capita income. Low per capita income again results in low savings,
low investment and low capital formation.
Thus Underdeveloped Countries (UDCs) are caught in the grip of vicious circle of poverty. Lack
of capital does not allow an economy to introduce the latest technologies. Thus, economy
becomes technologically backward and internationally in competitive.
The CSOs Quick Estimates for 2009-10 placed gross domestic savings at 33.7 per cent of the
GDP at current market prices. With private-sector savings more or less static, ii was the savings of
the public sector that went up from a revised level of 0.5 per cent in 2008-09 to 2.1 per cent in
2009-10. In the investment sphere the ratio of gross investment came down to around 36.5 per
cent in 2009-10 from 38 per cent in 2007-08.
8. Low Level of human Development:
Human Development Index (IIDI) constructed by United Nations Development Programme
(UNDP) has become an important indicator of development. IIDI is a composite index of three
important parameters of development- education health and income. Every year, in Human
Development Report (HDR) value of IIDI is calculated for each country and then they are ranked
and classified into three categories high, medium and low human development countries.
According to the UNDP Global Human Development Index (IIDI) 2011. India is ranked 134th
among 187 countries.
9. Balance of Payments (BoP):
BoP is the systematic record of all economic transactions like trade of goods, trade of services,
unilateral transfers, foreign investment, etc. between a country and rest of the world. BoP of a
country is also an indicator of development or underdevelopment of the country.
They invite foreign capital to fill their investment deficiency. Indias BoP is generally
unfavourable i.e., it faces deficit. To fill this deficit it has to borrow from other countries and
international organisations like IMF, World Bank, ADB, etc. In lieu of loans, these organisations
interfere in important policy matters and impose their terms and conditions.
10. Social Peculiarities:
High illiteracy rate, male dominated society, joint family system, fatalism, lack of
entrepreneurship, casteism, communalism, widespread child labour, etc. are some characteristics
of Indian society which distinguish it from developed societies.