Salient features of Indian Economy
India is a Mixed economy. In a mixed economy, public sector (govt. owned) business enterprises exist along the private sector to achieve a welfare state (promoting, protecting social and economic well being of citizens) with a socialist pattern of society. Ever since independence, India’s economic development has been guided by the twin objectives of developing:
- a) a rapidly and technologically progressive economy by democratic means; and
- b) a social order based on justice, offering equal opportunity to every citizen of the country.
In India, almost 60-70% of the total population still resides in rural areas and hence they depend on agriculture for their livelihood. It contributes only ~16% to GDP of India.
India is overpopulated. In every decade the Indian population gets increased by about 20%. During 2001-11, the population increased by 17.6%. With this high growth rate of the population about 1.7 crore new persons are added to the Indian population every year. To sustain 17.5% of the world population India only has 2.46% of the world’s land area. This has lead to a high population density and food scarcity.
India has not yet achieved the goal of balanced economic development. In a balanced economy, first, the primary sector should develop and then the secondary sector and later on the tertiary sector. But, in India, the 1st primary sector developed and then the secondary sector was overridden and directly tertiary sector developed. According to the latest data available, about 64% of the total labor force is dependent on agriculture, 16% on industries and the rest about 20% on the trade, transport and other services. Secondary sector results in capital formation in an economy which is weaker in India. India needs an emphasis on the secondary sector to sustain its economy.
Another basic characteristic of the Indian economy is the existence of capital deficiency which is reflected in two ways –
- The amount of capital per head available is low; and
- The current rate of capital formation is also low.
India has to replace the current capital goods with new capital goods to increase the produce and capital formation as there is a direct relationship between capital formation and the growth trajectory.
There is a lack of physical infrastructure (i.e. road, electricity, banking, transportation, insurance, energy) and the social infrastructure (i.e. education, health, housing, drinking water, sanitation) that hinders the development process of a country.
Social Infrastructure: Helps the economic system from outside, increases the quality of human resources.
Physical Infrastructure/Economic infrastructure: It helps the economic system from inside; i.e. road, electricity, banking, transportation, insurance, energy etc.
India lacks a regulatory framework for infrastructure. India requires an independent regulatory body like SEBI which should protect the investors from uncertainties, it should remove the obstacles for Public-Private projects and safeguard economic projects.
Certain institutions necessary for economic development are not adequately developed. For instance, to mobilize savings and more especially the savings of the rural sector, the creation and the development of financial institutions is essential. India suffers from the inadequacy of financial institutions in rural areas.