Characteristics of Indian Economy | Famous Books for UPSC Exam (Summary & Tests) PDF Download

Characteristics of a Developing Economy

Before we explore the specifics of the Indian Economy, let's first grasp the characteristic features commonly associated with developing economies:

• Low Per Capita Real Income: A developing economy often exhibits a low per capita real income, representing the average purchasing power of its citizens. In India's case, this income disparity is prevalent, with a significant gap between the real incomes of billionaires and daily wage laborers.
• High Rate of Population Growth: India bears witness to a remarkably high rate of population growth, making it the second-most populous country globally, after China. Providing adequate infrastructure and resources to sustain such a vast population is a formidable challenge for the nation.
• High Rate of Unemployment: Unemployment remains a pressing issue in developing economies like India. The lack of employment opportunities leaves many individuals and families struggling to meet their basic needs, perpetuating the cycle of poverty.
• Dependence on the Primary Sector: In the absence of well-developed industries, individuals often resort to primary sector jobs, such as agriculture. While these activities are vital, they do not significantly contribute to economic growth, leading to a slow-paced development process.
• Vicious Circle of Poverty: The vicious circle of poverty manifests itself in developing economies, forming a self-reinforcing cycle. Low purchasing power leads to reduced demand for goods and services, resulting in low investment and income levels, further exacerbating poverty.

Nature and Characteristics of the Indian Economy

Now that we have a clear understanding of the general traits of developing economies, let's analyze how these characteristics apply to India:

• High Level of Population Growth: India's population reached a staggering 1.38 billion in 2020, making it the second-most populous country globally. With 17% of the world's population, India faces immense challenges in catering to the needs of its citizens.
• Perceived (Low) Per Capita Real Income: The per capita real income in India stands at approximately Rs 1.35 lakh for the year 2019-20. However, this figure fails to account for income disparities between different sections of the society.
• Prevalence of Unemployment, Underemployment, and Disguised Unemployment: The Indian Economy struggles with high rates of unemployment, underemployment, and disguised unemployment. Limited opportunities in the tertiary and secondary sectors force many to rely on primary sector jobs, perpetuating the cycle of poverty.