UNIT 1
INDIAN ECONOMY
Low per capita income
In India, the value and per capita income individual income is extremely less and it's considered as major features of underdeveloped economy.
As per International Bank for Reconstruction and Development estimates, the per capita income of India was $ 720 in 2005. This per capita income level of India is that the lowest within the world and it's even less than China and Pakistan.
In 2005, the per capita income of Switzerland was nearly 76 times more, in U.S.A. About 61 times more , in Germany about 48 times more and in Japan about 54 times more the per capita income figure in India. Thus the quality of living of Indian people remained right along very low as compared thereto of developed countries of the planet .
This disparity within the per capita income of India and other developed countries has registered an important increase during the last four decades (1960-2005).
Although the per capita income at official exchange rates exaggerated this disparity but after making necessary correction through purchasing power parity figures, the per capita GNP of U.S.A. Was 12.0 times more that of India in 2005 as against 68.0 times more that of India at official exchange rates.
Excessive dependence of agriculture and first producing:
Indian economy is characterized by heavy dependence on agriculture and thus it's primary producing. Out of the entire working population of India, a really high proportion of it's involved in agriculture and allied activities, which contributed a more share within the value of India.
In 2004, nearly 58 per cent of the entire working population of India was involved in agriculture and allied activities and was contributing about only 21.0 per cent of the entire income.
In majority of the countries of Asia, Middle East and Africa, from two-thirds to four- fifths of their total population are completely hooked in to agriculture. Within the developed countries like U.K., U.S.A. And Japan, the half of of active population involved in agriculture ranges between 1 to five per cent.Thus our agricultural sector is overburdened because the majority of our working population is counting on agriculture.
High rate of increase
India is maintaining a really high rate of growth of population from 1950. Thus the pressure of population in India is extremely heavy. This has resulted from a really high level of birth rates with a falling level of death rates prevailing in India.
In India, the speed of growth of population has been rising from 1.31 per cent yearly during 1941-50 to 2.5 per cent yearly during 1971-81 to 2.11 per cent yearly during 1981-91 then finally to 1.77 per cent during 2001-2011.
The prime cause behind this rapid climb of population is that the more fall in its death rate from 49 per thousand during 1911-20 to 7.1 per thousand in 2011. On the opposite hand, compared to its death rate, the birth rate of our population has gradually reduced from 49 per thousand during 1911-20 to 21.8 per thousand in 2011.Thus whatever development that has been achieved within the country, it's being swallowed up by the increased population. Moreover, this high rate of growth of population necessitates a more rate of economic process only for leveling an equivalent standard of living.
This imposes a more economic burden on the economy of India on maintain such a rapidly growing population we require food, cloth, house, schooling, health facilities etc. in greater magnitude. Population explosion is additionally liable for increase within the labor pool in india.
Existence of severe unemployment and under-employment:
Rapid growth of population including in sufficient growth of secondary and tertiary occupations are liable for the occurrence of chronic unemployment and under-employment problem in India. In India, unemployment is structural one, not like in developed countries, which is of cyclical type.Here unemployment in India is that the results of absence of capital. Indian industries aren't getting adequate amount of capital for its necessary expansion so on absorb the whole surplus labor pool into it.
Moreover, larger number of labor pool is participated within the agricultural sector of the Indian economy than what's really needed. This has reduced the marginal product of agricultural labourer either to a negligible rate or to zero or maybe to a negative amount.
There exists disguised unemployment in Indian agricultural sector which has resulted from an excessive amount of dependence of population ashore and absence of other occupations within the rural areas.
Moreover, within the urban areas of India, the matter of educated unemployment has also taken a significant turn. Thus both the agricultural and concrete area of India has been affected by the intense problem of unemployment and under-employment to an outsized extent. Thus the Third Five Year Plan mentioned, “Urban and Rural unemployment actually constitute a serious indivisible problem.”
During the 5 year period of 1990-95, new entrants to the labor pool are estimation of 37 million. To place it in differently we will guess that total burden of unemployment during this Eighth Plan would be around 65 million which may be a matter of great concern for the economy of India.
The incidence of unemployment on CDS basis increased from 7.31 you look after labor pool in 1999-2000 to eight .28 you look after labor pool in 2004-05 year.
Poor rate of capital formation
Capital deficiency is one among the characteristic features of the Indian economy. Both the quantity of capital available per head and therefore the present rate of capital formation in India is extremely low. Consumption of crude steel and energy are the 2 major indicators of low capital per head within the underdeveloped countries like India.
In 1987, the per capita consumption of steel in our county was only 20 kg as against 582 kg for Japan, 417 kg for U.S.A., 259 kg for U.K. And 64 kg for China., the per capita consumption of electricity in 2003 was only 594 for India as against 14,057 for U.S.A., 5,943 for U.K., 8,212 for Japan & 1,440 for China.
Moreover, this low level of capital formation in India is additionally thanks to weakness of the inducement of invest and also thanks to low propensity and capacity to save lots of . As per Colin Clark’s estimate, so as to take care of an equivalent standard of living, India requires minimum 14 per cent level of gross capital formation.
To achieve a more rate of economic process and to enhance the quality of living, a still more rate of capital formation is extremely much required in India. In India the speed of saving as per cent of GDP has gradually increased from 14.2 per cent in 1965-66 to 30.6 per cent in 2013-14 which is moderately high in compared to half-hour in Japan, 23 you bored with Germany, 15 % in U.K. And 17 per cent in USA.
But considering the heavy population pressure and therefore the need for self sustained growth, this rate of saving is insufficient and thus the enhancement of the speed of capital formation is badly needed
Inequality within the distribution of wealth:
Another important characteristic of our county economy is that the mal-distribution of wealth: The report of the Federal Reserve Bank of India reveals that almost 20 per cent of the households owing but Rs 1000 worth of assets have only 0.7 per cent of the entire assets.
Moreover, 51 per cent of the households owing but Rs 5000 worth of assets possessed barely 8 per cent of the entire assets. Lastly, the highest four per cent households having assets worth quite Rs 50,000 held quite 31 per cent of the entire assets.
Mal distribution in income is that the results of inequality within the distribution of assets within the rural areas. On the opposite hand, in respect of commercial front there occurs a high degree of concentration of assets within the hands of only a few big Industrial houses. This shows high degree of assets concentration within the hands of only a few powerful business houses of India.
Low level of technology:
Prevalence of low level of technology is one among the important characteristics of an underdeveloped economy like India. The economy of India is thus affected by technological backwardness. Traditional techniques of production are largely being applied in both the agricultural and industrial sectors of India.
Sophisticated modern technology is being applied in productive units at a really lower scale because it is extremely much expensive. Moreover, it's considerably difficult to adopt advance technology in Indian productive system with its untrained, illiterate and unskilled labor.
Thus thanks to the appliance of poor technology and lower skills, the productivity- in both the agricultural and industrial sectors of India is extremely less. This has resulted in inefficient and insufficient production leading towards poverty in India.
Under-utilization of natural resources:
In respect of natural endowments India is taken into account as a really rich country. Various sorts of natural resources, viz., land, water, minerals, forest and power resources are available in sufficient quantity within the various parts of the country.
But thanks to its various inherent problems like inaccessible region, primitive techniques, shortage of capital and little extent of the market such huge resources remained largely under-utilized. An enormous quantity of mineral and forest resources of India still remains largely unexplored. Until recently, India wasn't in position to develop even 5 per cent of total hydropower potential of the country.
Huge dependence of population on agriculture
Another aspect that reflects the backwardness of the Indian economy is that the distribution of occupations within the country. The Indian agriculture sector has managed to measure up to the stress of the fast-increasing population of the country.
As per to the planet Bank, in 2014, nearly 47 you look after the working population in India was involved in agriculture. Unfortunately, it contributed merely Revolutionary Organization 17 November to the value implying a coffee productivity per person within the sector. The expansion of industries did not attract enough manpower either.
Heavy population pressure
Another factor which contributes to the economic issues in India is population. Today, India is that the second majority-populated country within the world, the primary being China.
We have a high-level of birth rates and a falling level of death rates. So as to take care of a growing population, the administration must lookout of the essential requirements of food, clothing, shelter, medicine, schooling, etc. Hence, there's an increased economic burden on the country.
The existence of chronic unemployment and under-employment
The huge unemployed working population is another aspect which contributes to the economic issues in India. There's an abundance of labor in India which makes it difficult to supply gainful employment to the whole population.
Also, the deficiency of capital has led to the inadequate growth of the secondary and tertiary occupations. This has further contributed to chronic unemployment and under-employment in India.
With nearly half the working population involved in agriculture, the marginal product of an agricultural labourer has become negligible. The matter of the increasing number of educated-unemployed has added to the woes of the country too.
Slow improvement in Rate of Capital Formation
India always had a deficiency of capital. However, in recent years, India has experienced a slow but steady improvement in capital formation. We experienced a increase of 1.6 % during 2000-05 and needed to take a position around 6.4 you must offset the extra burden thanks to the increased population.
Therefore, India requires a gross capital formation of around Bastille Day to offset depreciation and maintain an equivalent level of living. The sole thanks to improve the quality of living is to extend the speed of gross capital formation.
Inequality in wealth distribution
As per to Oxfam’s ‘An economy for the 99 %’ report, 2017, the gap between the rich and therefore the poor within the world is large . Within the world, eight men own an equivalent wealth because the 3.6 billion people that form the poorest half humanity.
In India, merely I Chronicles of the population has 58 you look after the entire Indian wealth. Also, 57 billionaires have an equivalent amount of wealth because the bottom 70 you look after India. Inequal distribution of wealth is certainly one among the main economic issues in India.
Poor Quality of Human Capital
In the broader sense of the term, capital formation includes the utilization of any resource that enhances the capacity of production.
Therefore, the knowledge and training of the population may be a sort of capital. Hence, the expenditure on education, skill-training, research, and improvement in health are a neighborhood of human capital.
To give you a perspective, the United Nations Development Program (UNDP), ranks countries supported the Human Development Index (HDI). This is often supported the anticipation , education, and per-capita income. During this index, India ranked 130 out of 188 countries in 2014.
Low level of technology
New technologies are being developed a day . However, they're expensive and need people with a substantial amount of skill to use them in production.
Any new technology requires capital and trained and skilled personnel. Therefore, the deficiency of human capital and therefore the absence of skilled labor are major hurdles in spreading technology within the economy.
Another aspect that adds to the economic issues in India is that poor farmers cannot even buy essential things like improved seeds, fertilizers, and machines like tractors, investors, etc. Further, majority enterprises in India are micro or small. Hence, they can't afford modern and more productive technologies.
Absence of access to basic amenities
In 2011, as per to the Census of India, nearly 7 you look after India’s population lives in rural and slum areas. Also, only 46.6 % of households in India have access to beverage within their premises. Also, only 46.9 you look after households have toilet facilities within the household premises.
This results in the low efficiency of Indian workers. Also, dedicated and skilled healthcare personnel are required for the efficient and effective delivery of health services. However, ensuring that such professionals are available during a country like India may be a huge challenge.
Demographic characteristics
As per to the 2011 Census, India had a population density of 382 per square kilometer as against the planet population density of 41 per square kilometer.
Further, 29.5 it had been within the age bracket of 0-14 years, 62.5 you bored with the working age bracket of 15-59 years, and around V-E Day within the age bracket of 60 years and above. This proves that the dependency burden of our population is extremely high.
Under-utilization of natural resources
India is rich in natural resources like land, water, minerals, and power resources. However, thanks to problems like inaccessible regions, primitive technologies, and a shortage of capital, these resources are largely under-utilized. This contributes to the economic issues in India.
Absence of infrastructure
The absence of infrastructural facilities may be a significant issue affecting the Indian economy. These include transportation, communication, electricity generation, and distribution, banking and credit facilities, health and academic institutions, etc. Therefore, the potential of various regions of the country remains under-utilized.
References
1. Indian Economy - Rudra Dutt & Sundarram
2. Bhartiya Arthashastra – L. M. Roy
3. Indian Economy – Uma & Kapila
