Characteristics of Indian Economy

India is a growing country with a mixed economy. The characteristics of the Indian economy include a large population, many people living below the poverty line, poor infrastructure, a focus on agriculture, slow capital growth, and low income per person. Since Independence, India has made progress in many areas. While it is still developing, the country is slowly moving towards becoming developed. A major change happened in 1991 when important economic reforms were introduced, helping the economy grow.

Basic Characteristics of Indian Economy

The Indian economy is a developing economy, and this is owed to the fact that there are extremely high levels of poverty, unemployment, illiteracy, etc. in India. With a suddenly diminishing Gross Domestic Product (GDP) to add to the various problems faced by the Indian economy, there are a lot of factors that contribute to the nature and characteristics of the Indian economy being a developing economy. Let’s understand the characteristic features of developing economies and then understand how these features apply to the Indian economic realm

So let’s understand What are the Characteristics of the Indian Economy.

Main Characteristics of Indian Economy

The Indian economy is still developing, mainly due to issues like illiteracy, unemployment, and poverty. Along with these problems, a declining Gross Domestic Product (GDP) adds to the challenges faced by the economy. Several factors contribute to the characteristics of India being a developing economy.

Low Per Capita Real Income

Real income refers to the purchasing power of a country in a year, while per capita income is the average purchasing power of an individual. Developing nations, including India, have low per capita income.

High Population Growth

India's large population requires proper education, healthcare, and job opportunities. However, providing these facilities for everyone is a huge challenge, leaving the economy in a developing state.

Poverty Cycle

Poverty creates problems on both the supply and demand sides. On the supply side, products and services remain unsold, leading to a lack of investment and low per capita income. On the demand side, low income reduces purchasing power, making goods and services unaffordable. This cycle keeps developing economies trapped.

Nature and Characteristics of Indian Economy

Let’s take a look at how so with the basic characteristics of the Indian economy condensed into the following pointers:

High Level of Population Growth

The population of India as last recorded in the year 2020 is 138 crores (1.38 billion) people and still increasing, putting it only second highest in the world after China. With the world population nearing only 8 billion people, India’s share of the same is a whopping 17 per cent.

Perceived (Low) Per Capita Real Income

Fairly recent statistics of India’s income puts the country’s per capita real income at Rs 1.35 lakh for the year 2019-20. Do realise that the average real incomes of Indian billionaires, as well as those of daily wage labourers, are all averaged here, thus the ballpark figure of 1.35 lakh rupees is not all that accurate.

Prevalence of Unemployment, Underemployment and Disguised Unemployment

The prevalence of unemployment and its cousins - underemployment and disguised unemployment are incredibly harmful to the economy. With a huge population with barely any appropriate work available, things have the potential to go very south. This can be attributed to dependence on the primary sector due to the underdevelopment of the tertiary and secondary sectors of the economy. The same factors shove the economy way down into the trenches of the vicious circle of poverty and leave it there.

Key Features of the Indian Economy

Agriculture-Based Economy

India's economy relies heavily on agriculture. Farming and related activities contribute about 14.2% to the GDP, and nearly 53% of the population depends on the agricultural sector for their livelihood.

Overpopulation

Overpopulation is a major issue in India. The population grows by around 20% every decade. Currently, India holds about 17.5% of the world’s total population, creating challenges for resources and infrastructure.

Income Inequality

Income distribution in India is highly uneven. According to recent data, 1% of the population owns 53% of the country’s wealth, and the top 10% hold over 76%. Meanwhile, the remaining 90% of the population owns less than 25% of the total wealth.

Low Capital Growth

Low-income levels have slowed the growth of capital in the country. Gross Domestic Capital has seen a sharp decline in recent years compared to previous levels.

Poor Infrastructure

A large part of India still lacks basic facilities. About 25% of households have no access to electricity, 97 million people lack clean drinking water, and around 840 million people do not have proper sanitation. Addressing these issues requires significant investment.

Inefficient Markets

Markets in India often function inefficiently due to poor mobility of goods and resources. This leads to improper utilisation of resources and frequent price fluctuations.

Poverty Cycle

India faces a poverty trap, often described as "a country is poor because it is poor." Low income reduces the purchasing power of people, making goods and services unaffordable. This cycle continues, keeping the economy in a developing phase.

Outdated Technology

Most of India’s production processes are labour-intensive and lack modern machinery or innovations, slowing productivity and efficiency.

Social Issues

Social problems like communalism, caste discrimination, male dominance, and outdated beliefs restrict economic growth and development in the country.

Low Per Capita Income

India’s average income per person is very low compared to other developing countries. In 2020-21, the per capita net national income, based on 2011-12 prices, was estimated at around ₹86,659 by the Central Statistics Office (CSO).

Positive Developments

Despite these challenges, there are many positive changes in the Indian economy. Government initiatives like Digital India and Make in India have helped improve the economy by boosting digital connectivity and promoting manufacturing. India is steadily working towards a stronger and more stable financial structure.