INDIAN ECONOMYPROJECTTopic: CHARACTERISTICS OF INDIAN ECONOMY

SUBMITTED BY: SUBMITTED TO:

AJAY PRAKASH DR. JASBIR SINGH

BBA (B&I)

00214901813

III3rd SEMESTER

MAHARAJA SURAJMAL

INSTITUTE

ACKNOWLEDGEMENT:This assignment is intended to cover the “ OF INDIAN ECONOMY ”. Basic and pre-requisite information has been included.

I acknowledge the inspirations and blessing of my respected faculty Dr.jasbir singh. He made all my doubt crystal clear.

My HEARTFUL thanks are due to my friends for providing relevant resources.

In the last but not the least, my sense of gratitude is due to MAHARAJA SURAJMAL INSTITUTE.

Every effort has been made to avoid errors and mistakes; however their presence can’t be ruled out.

Contents: Introduction of India economy Characteristics on the eve of independence Current characteristics of Indian economy Conclusion Bibliography

Introduction of Indian Economy

On 15 august India gained freedom. The most important work in front of leader of independent India was to decide the type of economic system most suitable for India

Economy system is defined as an arrangement by which the central problems of an economy are solved.

An economy is an organization of economics activities which provides people with the means to work and earn a living

The economy of India is the tenth-largest in the world by nominal GDP and the third-largest by purchasing power parity (PPP).

The country is one of the G-20 major economies, a member of BRICS and a developing economy that is among the top 20 global traders according to the WTO. India was the 19th-largest merchandise and the 6th largest services exporter in the world in 2013; it imported a total of $616.7 billion worth of merchandise and services in 2013, as the 12th-largest merchandise and 7th largest services importer. India's economic growth slowed to 4.7% for the 2013–14 fiscal years, in contrast to higher economic growth rates in 2000s. IMF projects India's GDP to grow at 5.4% over 2014-15. Agriculture sector is the largest employer in India's economy but contributes a declining share of its GDP (13.7% in 2012-13). Its manufacturing industry has held a constant share of its economic contribution, while the fastest-growing part of the economy has been its services sector - which includes construction, telecom, software and information technologies, infrastructure, tourism, education, health care, travel, trade, banking and others components of its economy.

CHARACTERISTICS INDIAN ECONOMY ON THE EVE OF INDEPENDENCEAt 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 this Indian economy was semi feudal, depreciated, and stagnant. India suffered from capital deficiency, high population growth, famines, unemployment, economic disparities and lots more. India was one of the richest and the most flourishing nations of the world and this is evident from the past history of the nation. India attracted many invaders in the past with its wealth. However, after British Invasion, India suffered a massive economic downfall and it continued even after India's Independence. Nevertheless, Indian economy is now gaining momentum and is developing quite fast.

1. Low level of economic development

Under the colonial rule India had an independent economy before the advent of the British rule. Though agriculture was the main source of livelihood for most people, the country’s economy was characterized by various kinds of manufacturing activities. India was particularly well known for its handicraft industries in the fields of cotton and silk textiles, metal and precious stone works etc. These products enjoyed a worldwide market based on the reputation of the fine quality of material used and the high standards of craftsmanship seen in all imports from India.

The economic policies pursued by the colonial government in India were concerned more with the protection and promotion of the economic interests of their home country than with the development of the Indian economy most studies did find that the country’s growth of aggregate real output during the first half of the 20th century was less than 2 per coupled with a measure of half per cent growth per capita output per year.

2. Commercialization of Agricultural sector

India’s economy the British colonial rule remained fundamentally agrarian- about 85 per cent of the country’s population lived mostly in villages and derived livelihood directly or indirectly from agriculture. However, despite being the occupation of such a large population, the agricultural sector continued to experience stagnation and, not infrequently, unusual deterioration. Agricultural productivity became incrementally low though, in absolute terms, the sector shows expansion some growth due to the expansion of the aggregate area under cultivation.

This stagnation in the agricultural sector was caused mainly because of the various systems of land settlement that were introduced by the colonial government. That is the introduction of middle man to farm field. Neither the government nor the zamindars did anything for the improvement of farm field.

The other reason for the back ward condition of agriculture during this period was low level of technology, negligible use of chemical fertilizers and pesticides and low irrigational facilities aggravated the problem.

The commercialization of agriculture also act as a reason for the back ward condition of the sector, commercialization of agriculture refers shifting of production from food grains to cash crops or the agriculture produce is for market not for consumption. There was some evidence of a relatively higher yield of cash crops in certain areas of the country due to commercialization of agriculture.

3. Poor performance of Industrial Sector

As in the case of agriculture, so also in manufacturing, India could not develop a sound industrial base under the colonial rule. Even as the country’s world famous handicraft industries declined, no corresponding modern industrial base was allowed to come up to take pride of place so long enjoyed by second by the former. The British did not take a sufficient step for industrialization of the country rather than deindustrialize the nation. There are two motives behind this one is to convert India as achieve supplier of raw material for British factories and a market for selling British finished goods.

During the second half of the 19th century, modern industry began to take root in India but its progress remained very slow. Initially, this development was confined to the setting up of cotton and jute textile mills. The large scale industry did not setup the colonial rule, the only large scale industry was setup in 1907 (TISCO). The growth rate new industrial sector and its contribution to the Gross Domestic Product (GDP) remained very small. The public investment in industries will remain very low in this period. On the eve of independence industrial sector contribute 15.7%. There is bleak growth of the modern industry.

4. Less Investment in Foreign Trade

India has been an important trading nation since ancient times. But the restrictive policies of commodity production, trade and tariff pursued by the colonial government adversely affected the structure, composition and volume of India’s foreign trade. Consequently, India becomes an exporter of primary products such as raw silk, cotton, wool, sugar, indigo, jute etc. And an importer of finished consumer goods like cotton, silk and woolen clothes and capital goods like light machinery produced in the factory of Britain. Britain maintained a monopoly control over India’s exports and imports. The most important characteristic of India’s foreign trade throughout the colonial period was the generation of a large export surplus, this surplus was used for meeting was expenses.

5. Unbiased Occupational Structure

During the colonial period, the occupational structure of India, i.e., distribution of working persons across different industries and sectors, showed little sign of change. The agricultural sector accounted for the largest share of workforce, which usually remained at a high of 70- 75 per cent which the manufacturing and the services sectors accounted for only 10 and 15-20 per cent respectively.

Occupation 1951(in %)1. PRIMARY SECTOR 72.7

Agriculture

Agriculture Labour

Forestry, Fisheries, Animal Husbandry

Mining

50.0

19.7

2.4

0.6

2. SECONDARY SECTOR 10.1

Small And Large Industries

Building Construction

9.0

1.13. TERTIARY SECTOR 17.2

Trade And Commerce

Transport , Storages And Communication

Others Services

5.2

1.4

10.6TOTAL 100

6. Demographic Condition

Various details about the population of British India were first collected through a census in 1881. Though suffering from certain limitations, it revealed the unevenness in India’s population growth. Subsequently, every ten years such census operations were carried out. Before 1921, India was in the first stage of demographic transition. The second stage of transition began after 1921. However, neither the total population of India nor the rate of population growth at this stage was very high.

The socio demographic indicators moves in backward direction during British rule, the literacy rate was less than 16% among his the female literacy was about 7% only. The public health facilities are not available if available, the facilities are adequate. Therefore water bone and air bone disease are frequent in India. The mortality rate is very alarming especially infant mortality rate is very high in world is about 218per thousand. The life expectancy at that time was 32 years.

7. Lack of Infrastructure

Under the colonial rule, basic infrastructure such as railways, ports, water transport, posts and telegraphs did develop. However, the real motive behind this development was not to provide basic amenities to the people but to sub serve various colonial interests. Roads constructed in India prior to the advent of the British rule were not fit for modern transport.The British introduced the railways in 1850 and it is considered as one of their most important contributions. Under the colonial rule India had an independent economy before the advent of the British rule. Though agriculture was the main source of livelihood for most people, the country’s economy was characterized by various kinds of manufacturing activities. India was particularly well known for its handicraft industries in the fields of cotton and silk textiles, metal and precious stone works etc. These products enjoyed a worldwide market based on the reputation of the fine quality of material used and the high standards of craftsmanship seen in all imports from India. The economic policies pursued by the colonial government in India were concerned more with the protection and promotion of the economic interests of their home country than with the development of the Indian economy. Most studies did find that the counter’s growth of aggregate real output during the first half of the twentieth century was less than two per coupled with a meager half per cent growth per capita output per year.

CHARACTERISTICS OF INDIAN ECONOMY IN 2012India is the second most populated country of the world. During 1991-2001, population increased by 21.34%. With this high growth rate of population about 1.7 crore new persons are being added to Indian population every year. According to 2011 census, the total Indian population stands at a high level of 121 core which is 17.1% of world's total population. To maintain 16.7% of world population Indian holds only 2.42% of total land area of the world. India lacks in large industrialization based on modern and advanced technology, which fails to accelerate the pace of development in the economy. Indian economy is an under developed economy in which agriculture is the back bone of Indian economic. 22% of India’s population are on the below poverty line. Resources are not fully utilized. India selling iron ore by trucks and getting blades by packets. Many people of India are leading a poverty line. Indian economic is affected by it. So India is termed as developing economic by modern views.

The important features of Indian economy:

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. India’s population has reached 121 cores in 2011 census. 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. Annual population growth rate has slow down from 2.15% to 1.76%.

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. Agriculture sector is the largest employer in India's economy but contributes a declining share of its GDP (13.7% in 2012-13). The average annual growth rate is 3.6% during eleventh five year plan for the agriculture and allied sector fell short of the target of 4%.

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. When there is a 1% increse in the vlue added led to 0.44% growth in employment .

5. Low Rate of Capital Formation:

In 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 equal 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 developing country. India economy also suffers from this typical feature of technological backwardness. Techniques applied in agriculture industries milling and other economic fields are primitive in nature. Main industries, agriculture, petroleum products, chemicals, pharmaceuticals, software, textiles, steel, transportation equipment, machinery, cement, mining, construction. India's infrastructure and transport sector contributes about 5% of its GDP.

7. Backward 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. The inflation recorded at 7.80% in august of 2014.

Conclusion

Thus on the eve of independence, India was a poor country its GDP was very low and there were no infrastructure and no heavy industry. For the development of Indian economy, India makes five year plan it starts from 1951 to till now. Currently 12th five year plan is going on.

In 1991 economic reforms are introduces which help India economy a boost in developing and now Indian economy is the tenth-largest in the world by nominal GDP and third largest in purchasing power parity.

Indian economy is now changing because there are huge changes its occupation structure people are changing their sector now only 55% of population fall under the primary sector.

Bibliography

Books:

1. Indian economic development by Dr. Deepashree publication saraswati house pvt. Ltd. Edition 2012 .

2. Indian economy by Sandeep Garg Edition 2012.3. Indian economy by T R Jain and V K Ohri Edition 2011.

Websites:

1. www.wikipedia.org 2. www.sakshieducation.com 3. www.secetariatassistant.com 4. www.textbooksonline.tn.nic.in