what are the characteristics of Indian Economy
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Indian Economy:Characteristic # 1.
Low per capita income:
In India, the national income and per capita income is very low and it is considered as one of the basic features of underdevelopment. As per World Bank estimates, the per capita income of India stood at only $ 720 in 2005. Keeping aside a very few countries, this per capita income figure of India is the lowest in the world and it is even lower than China and Pakistan.
In 2005, the per capita income figure in Switzerland was nearly 76 times, in U.S.A. about 61 times, in Germany about 48 times and in Japan about 54 times the per capita income figure in India. Thus the standard of living of Indian people remained all along very low in comparison to that of developed countries of the world.
This disparity in the per capita income of India and other developed countries has registered a manifold 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 that of India in 2005 as against 68.0 times that of India at official exchange rates.
Even after making necessary adjustment, the per capita income differences, although narrowed down, yet remain quite significant and huge. Table 1.3 will clarify the position.
In order to convert national currency figures to the US dollars, the utilisation of official exchange rates does not allow to measure the relative domestic purchasing power of currencies. In this connection, work of LB. Kravis and others titled “International Comparison of Real Product and Purchasing Power”(1978) has provided some relief.
Following the aforesaid work, the United Nations International Comparison Programme (ICP) has introduced measures of real GDP on an internationally comparable scale using the system of purchasing power parities (PPPs) instead of exchange rates as factors for conversion.
Indian Economy:Characteristic # 2.
Excessive dependence of agriculture and primary producing:
Indian economy is characterised by too much dependence on agriculture and thus it is primary producing. Out of the total working population of our country, a very high proportion of it is engaged in agriculture and allied activities, which contributed a large share in the national income of our country.
In 2004, nearly 58 per cent of the total working population of our country was engaged in agriculture and allied activities and was contributing about 21.0 per cent of the total national income.
In most of the countries of Asia, Middle East and Africa, from two-thirds to four- fifths of their total population are solely dependent on agriculture. In most of the developed countries like U.K., U.S.A. and Japan, the percentage of active population engaged in agriculture ranges between 1 to 5 per cent. Table 1.4 will clarify this position.
Table 1.4 reveals that in India 58 per cent of its active population is engaged in agriculture but agriculture contributes only about 21 per cent of the national income of our country. Moreover, low agricultural productivity, lack of modernisation and lack of diversification in its output are some of the basic problems from which our agricultural sector is suffering.
Thus our agricultural sector is overburdened as the majority of our active population is depending on agriculture.
Indian Economy:Characteristic # 3.
High rate of population growth:
India is maintaining a very high rate of growth of population since 1950. Thus the pressure of population in our country is very heavy. This has resulted from a very high level of birth rates coupled with a falling level of death rates prevailing in our country.
In India, the rate of growth of population has been gradually increasing from 1.31 per cent annually during 1941-50 to 2.5 per cent annually during 1971-81 to 2.11 per cent annually during 1981-91 and then finally to 1.77 per cent during 2001-2011.
The prime cause behind this rapid growth of population is the steep fall in its death rate from 49 per thousand during 1911-20 to 7.1 per thousand in 2011. On the other hand, compared to its death rate, the birth rate of our population has gradually declined from 49 per thousand during 1911-20 to 21.8 per thousand in 2011.
Thus whatever development that has been achieved in the country, it is being swallowed up by the increased population. Moreover, this high rate of growth of population necessitates a higher rate of economic growth just for maintaining the same standard of living.
This imposes a greater economic burden on the economy of our country as to maintain such a rapidly growing population we require food, clothing, housing, schooling, health facilities etc. in greater magnitude. Besides, this fast rate of growth of population is also responsible for rapid increase in the labour force in our country.
Low per capita income:
In India, the national income and per capita income is very low and it is considered as one of the basic features of underdevelopment. As per World Bank estimates, the per capita income of India stood at only $ 720 in 2005. Keeping aside a very few countries, this per capita income figure of India is the lowest in the world and it is even lower than China and Pakistan.
In 2005, the per capita income figure in Switzerland was nearly 76 times, in U.S.A. about 61 times, in Germany about 48 times and in Japan about 54 times the per capita income figure in India. Thus the standard of living of Indian people remained all along very low in comparison to that of developed countries of the world.
This disparity in the per capita income of India and other developed countries has registered a manifold 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 that of India in 2005 as against 68.0 times that of India at official exchange rates.
Even after making necessary adjustment, the per capita income differences, although narrowed down, yet remain quite significant and huge. Table 1.3 will clarify the position.
In order to convert national currency figures to the US dollars, the utilisation of official exchange rates does not allow to measure the relative domestic purchasing power of currencies. In this connection, work of LB. Kravis and others titled “International Comparison of Real Product and Purchasing Power”(1978) has provided some relief.
Following the aforesaid work, the United Nations International Comparison Programme (ICP) has introduced measures of real GDP on an internationally comparable scale using the system of purchasing power parities (PPPs) instead of exchange rates as factors for conversion.
Indian Economy:Characteristic # 2.
Excessive dependence of agriculture and primary producing:
Indian economy is characterised by too much dependence on agriculture and thus it is primary producing. Out of the total working population of our country, a very high proportion of it is engaged in agriculture and allied activities, which contributed a large share in the national income of our country.
In 2004, nearly 58 per cent of the total working population of our country was engaged in agriculture and allied activities and was contributing about 21.0 per cent of the total national income.
In most of the countries of Asia, Middle East and Africa, from two-thirds to four- fifths of their total population are solely dependent on agriculture. In most of the developed countries like U.K., U.S.A. and Japan, the percentage of active population engaged in agriculture ranges between 1 to 5 per cent. Table 1.4 will clarify this position.
Table 1.4 reveals that in India 58 per cent of its active population is engaged in agriculture but agriculture contributes only about 21 per cent of the national income of our country. Moreover, low agricultural productivity, lack of modernisation and lack of diversification in its output are some of the basic problems from which our agricultural sector is suffering.
Thus our agricultural sector is overburdened as the majority of our active population is depending on agriculture.
Indian Economy:Characteristic # 3.
High rate of population growth:
India is maintaining a very high rate of growth of population since 1950. Thus the pressure of population in our country is very heavy. This has resulted from a very high level of birth rates coupled with a falling level of death rates prevailing in our country.
In India, the rate of growth of population has been gradually increasing from 1.31 per cent annually during 1941-50 to 2.5 per cent annually during 1971-81 to 2.11 per cent annually during 1981-91 and then finally to 1.77 per cent during 2001-2011.
The prime cause behind this rapid growth of population is the steep fall in its death rate from 49 per thousand during 1911-20 to 7.1 per thousand in 2011. On the other hand, compared to its death rate, the birth rate of our population has gradually declined from 49 per thousand during 1911-20 to 21.8 per thousand in 2011.
Thus whatever development that has been achieved in the country, it is being swallowed up by the increased population. Moreover, this high rate of growth of population necessitates a higher rate of economic growth just for maintaining the same standard of living.
This imposes a greater economic burden on the economy of our country as to maintain such a rapidly growing population we require food, clothing, housing, schooling, health facilities etc. in greater magnitude. Besides, this fast rate of growth of population is also responsible for rapid increase in the labour force in our country.
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