3 Development Issues of Indian

Economy
On one hand, India is receiving accolades for a sustained growth rate
and on the other, it is still a low-income developing economy. Even
today, nearly 25 percent of India’s population lives below the poverty
line. Also, there are many human and natural resources which are
under-utilized. In this article, we will explore the economic issues in
India.

The Economic Issues in India

Being a poor country and one of the fastest growing economies in the
world, there are some unique economic issues in India as explained
below:

1. Low per capita income

Usually, developing economies have a low per-capita income. The
per capita income in India in 2014 was $1,560. In the same year, the
per-capita Gross National Income (GNI) of USA was 35 times that of
India and that of China was 5 times higher than India.

Further, apart from the low per-capita income, India also has a
problem of unequal distribution of income. This makes the problem
of poverty a critical one and a big obstacle in the economic progress
of the country. Therefore, low per-capita income is one of the
primary economic issues in India.

2. Huge dependence of population on agriculture

Another aspect that reflects the backwardness of the Indian economy
is the distribution of occupations in the country. The Indian
agriculture sector has managed to live up to the demands of the fast-
increasing population of the country.
According to the World Bank, in 2014, nearly 47 percent of the
working population in India was engaged in agriculture.
Unfortunately, it contributed merely 17 percent to the national
income implying a low productivity per person in the sector. The
expansion of industries failed to attract enough manpower either.

3. Heavy population pressure

Another factor which contributes to the economic issues in India is
population. Today, India is the second most-populated country in the
world, the first being China.

We have a high-level of birth rates and a falling level of death rates.

In order to maintain a growing population, the administration needs
to take care of the basic requirements of food, clothing, shelter,
medicine, schooling, etc. Hence, there is an increased economic
burden on the country.

4. 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 is an abundance of
labor in our country which makes it difficult to provide gainful
employment to the entire 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 of the working population engaged in agriculture,

the marginal product of an agricultural laborer has become
negligible. The problem of the increasing number of educated-
unemployed has added to the woes of the country too.
 5. 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 population growth of 1.6 percent during
2000-05 and needed to invest around 6.4 percent to offset the
additional burden due to the increased population.

Therefore, India requires a gross capital formation of around 14

percent to offset depreciation and maintain the same level of living.
The only way to improve the standard of living is to increase the rate
of gross capital formation.

6. Inequality in wealth distribution

According to Oxfam’s ‘An economy for the 99 percent’ report, 2017,
the gap between the rich and the poor in the world is huge. In the
world, eight men own the same wealth as the 3.6 billion people who
form the poorest half of humanity.

In India, merely 1 percent of the population has 58 percent of the

total Indian wealth. Also, 57 billionaires have the same amount of
wealth as the bottom 70 percent of India. Inequal distribution of
wealth is certainly one of the major economic issues in India.

7. Poor Quality of Human Capital

In the broader sense of the term, capital formation includes the use of
any resource that enhances the capacity of production.

Therefore, the knowledge and training of the population is a form of

capital. Hence, the expenditure on education, skill-training, research,
and improvement in health are a part of human capital.

To give you a perspective, the United Nations Development Program

(UNDP), ranks countries based on the Human Development Index
(HDI). This is based on the life expectancy, education, and per-capita
income. In this index, India ranked 130 out of 188 countries in 2014.

8. Low level of technology

New technologies are being developed every day. However, they are
expensive and require people with a considerable amount of skill to
apply them in production.

Any new technology requires capital and trained and skilled

personnel. Therefore, the deficiency of human capital and the
absence of skilled labor are major hurdles in spreading technology in
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, most
enterprises in India are micro or small. Hence, they cannot afford
modern and more productive technologies.

9. Lack of access to basic amenities

In 2011, according to the Census of India, nearly 7 percent of India’s
population lives in rural and slum areas. Also, only 46.6 percent of
households in India have access to drinking water within their
premises. Also, only 46.9 percent of households have toilet facilities
within the household premises.

This leads to 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 in a country like India is a huge challenge.
 10. Demographic characteristics
According to the 2011 Census, India had a population density of 382
per square kilometer as against the world population density of 41 per
square kilometer.

Further, 29.5 percent was in the age group of 0-14 years, 62.5 percent
in the working age group of 15-59 years, and around 8 percent in the
age group of 60 years and above. This proves that the dependency
burden of our population is very high.

11. Under-utilisation of natural resources

India is rich in natural resources like land, water, minerals, and power
resources. However, due 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.

12. Lack of infrastructure

The lack of infrastructural facilities is a serious problem affecting the
Indian economy. These include transportation, communication,
electricity generation, and distribution, banking and credit facilities,
health and educational institutions, etc. Therefore, the potential of
different regions of the country remains under-utilized.
Features of Indian Economy – 20 Points
Indian economy bags the seventh position among the other
strongest and largest economies among the world. Being one
of the top listed countries among the developing countries in
terms of industrialization and economic growth, India holds a
robust stand with an average growth rate of approx 7%.

The Indian economy has emerged as a robust economic player

among the economic giants like-US, UK, China, etc. Even
though the rate of growth has been sustainable and
comparatively stable, but there are still fair opportunities of
growth.

With the growing standards and opportunities in India, it is

expected to very soon capture a very dominant position among
the others in the world. The characteristic features of India
Economy is discussed below in details:

Features of Indian Economy

1. India has a mixed economy

Indian economy is a true example of complete mixed economy.

This means both private and public sectors co-exist and
function here, simultaneously. On one side, some of the
fundamental and heavy industrial units are being operated
under the public sector. Whereas, due to the liberalization
factors of the economy, the private sector has gained further
enhancements in terms of scope. This makes it a perfect
amalgamation of both public and private sectors being operated
and supported under a single economic cloud.

2. Agriculture plays the key role in supporting the

Indian economy
Agriculture being the maximum pursued occupation in Indian
plays an important role in its economy as well. Around 70% of
the occupational practice in India is covered by the farmers and
other agricultural units. This gives a higher impact on the Indian
economy, both directly and indirectly.  In fact, about 30% of our
GDP today is earned from the agricultural sector itself.
Agricultural sector is thereby also called as the backbone of the
Indian economy. It forms as a major component of livelihood for
maximum people in India. The agricultural products being
exported such as fruits, vegetables, spices, vegetable oils,
tobacco, animal hair, etc. also add to the economic uphold with
rise in the international trading.

3. Newly Industrialized Economy – good balance

between agriculture and industrial sector

Indian economy has been a true holder of newly imbibed

innovations in the formation of the country’s economy. Earlier
agriculture used to be the prime contributor as industrialization
was at a lower edge during the time. With the growing time,
subsequently industrial took a high tide in the country making it
a very important contributor to it. Well the Indian economy
keeps both these in good balance. It amalgamates the
agricultural outputs towards enhancing the industries and
contributing to the growth of the economy, together.

4. An Emerging Market

Being a developing country with great level of economic well-

being, India has emerged as an emerging market for the other
players. Holding a constant GDP rate even in the downfall
situations, it has kept its position intact making it a lucrative
spot for the other economies to invest. This has in turn also
helped the Indian economy exist as a robust economy among
the other leaders. India has a high potential with low
investments and risk factors, this also makes it an emerging
market for the world.
5. A Major Economy

Emerging as a top economic giant among the world economy,

India bags the seventh position in terms of nominal Gross
Domestic Product (GDP) and third in terms of Purchasing
Power Parity (PPP). These figures are a representation of the
Indian economy among the G20 countries. This is a clear
indication of the robustness Indian economy has gained over
decades and emerged as a major economy among the other
leading economies on the globe.

6. Federal in Character

Bearing a federal character in the economy upholds, in India

both the centre and state are economy growth drivers. They
equally act as the operators of the economies at their own
levels. In fact, the Indian constitution gives the clear
permissions and guidelines to operate and regulate the
economies and economic standard of living of the people both
at the center and the state level, separately.

7. Fast Growing Economy

India’s economy is one of the world’s fastest growing

economies on the globe. India’s economy has emerged as the
world’s fastest growing economy in the last quarter of 2014 and
has replaced the People’s Republic of China with a growth rate
of approx 7%.

8. Fast growing Service Sector

With growth in the service sector, Indian economy has

formulated its growth in the service sector as well. There has
been a high rise growth in the technical sectors like-e of
Information Technology Sector, BPO, etc. The business in
these sectors has not only added and enhanced the
contribution to the economy, but has also helped in the multi-
fold growth of the country a well. These emerging service
sectors have helped the country go global and helped in
spreading its branches around the world.

9. Unequal distribution of Income economic

disparities

There exists a huge economic disparity in the Indian economy.

There is a huge difference in the distribution of income among
the various categories of people on the basis of income. This
has lead to an increase in the poverty level in the society and a
maximum percentage of individuals are thus living under the –
Below Poverty Line (BPL). This unequal distribution of income
has created a huge gap and economic disparity among the
various categories of people in the Indian economy.

10. Instability of price – Cost of products is not

stable

Even though there has been a constant growth rate in the GDP
and growth opportunities in the Indian economy, but there have
been fluctuations in the price concerns too. Being depended on
the other bigger economic giants the price of the products and
services keep on fluctuating since decades. At times the
inflation grows high raising the prices of the commodities. This
clearly indicates the instability of the price concerns in the
Indian economy.

11. Lacks proper infrastructure

Even though there has been a gradual and high scale

improvement in the infrastructural development in the past few
decades, but there is still a scarcity of the same. The industrial
growth escalating in the country lacks proper infrastructure
growth. The rate at which the infrastructure is growing needs
proper infrastructure growth to support the growth process. This
has been a lacking point in the growth of the Indian economy.
With the subsequently supporting infrastructure the economy
has grown a lot, but will definitely need further growth support
in the form of proper infrastructure.

12. Inadequate Employment opportunities

India is a growing country with a growing economy as well!

Comparing the growth rate of the economy in the last few
decades there has been a gradual high-rise in the same. The
population rate has also grown on a large-scale; this has been
the biggest challenge for the growth of the economy. With
growing population there is a huge need of the employment
opportunities too! But, there have been inadequate employment
opportunities in the country that has affected the economy on a
large-scale. Even though the conditions have improved a lot in
the past few decades, but still in comparison to the other giant
economies there is a lot of scope of improvement.

13. Large Domestic consumption

With the escalating growth rate in the economy the standard of

living has grown a lot. This in turn has resulted in increasing the
domestic consumption in the country. With the growing
advancements and globalization, the domestic consumption
rate within the people of the country is already high, this adds a
lot to the Indian economy.

14. Rapid growth of Urban areas

Urbanization and planned development is a key ingredient

towards the growth of any of the economy around the world.
There has been a rapid growth of urban areas in India after
independence. The growth acceleration in the rate of
urbanization after independence was due to the country’s
adoption of a mixed economy. This has given rise in complete
development and rise of the private sector that has played a
key role in constituting the Indian economy. Thus,
urbanization is taking place at a quite faster rate in India
changing the shape of the Indian economy. The constant
urbanization is a key to the growth of the Indian economy.

15. Stable macro economy

The Indian economy has been projected and considered one of

the most stable macro economy around the world. It’s not just
the saying, but the facts too reflect the same. The current
year’s survey represents the Indian economy to be a “heaven
of macroeconomic stability, resilience and
optimism.  According to the last economic survey for the year
2014-15, 8%-plus GDP growth rate has been predicted, with
actual growth turning out to be a little less (7.6%). This is a
clear indication of a stable macro economic growth rate.

 16. Excellent human capital

The maximum population that constitutes the human capital of

India is young. This means that India is a pride owner of the
maximum percentage of youth human capital that is a great
indicator of the growth. The young population is not only
motivated but skilled and trained enough to maximize the
growth situations. Creating vital opportunities to expand the
business and other economic opportunities this human capital
plays a key role in maximizing the growth opportunities in the
country. Also, this has invited foreign investments to the
country and outsourcing opportunities too.

17. Large Population

India holds a top position in terms of population growth after

China. The population growth rate of India is very high and this
affects the Indian economy as well. The population growth rate
in India is as high as 2.0% annually, leading to the major leads
towards poverty. This population, however, has the highest
percentage of the youth crowd which if monitored and directed
in the right direction can turn out to produce wondrous growth
results in the economy.

18. Unequal wealth distribution

The Indian economy bears a great disparity between the rich

and the poor. There is a complete lop-sided distribution of the
wealth in the economy. This is why the rich are becoming richer
and the poor are growing even poor in the economy levels.
This unequal wealth distribution doesn’t affect the economy on
the whole, but definitely affects the per capita income and living
standards of the people in India. India tends to be the second
most unequal wealth distribution based economy in the world,
after Russia. This increases the political instability that affects
the economy a lot.

19. Pursues labor intensive techniques

Due to a high potential population bank in India, there exist

both merits and demerits of the same. In order to offer
employment opportunities to the maximum population crowd in
the country Indian economy focuses on labor intensive
techniques. These techniques help get the job done according
to the labor friendly standards contributing to maximizing the
employment opportunities in the country.

20. Technological use is less in comparison to the

well-developed economies

India being a growing economy is in the stage of further growth.

Even though the technology and technical usage in the country
is good enough, but is really less as compared to the well-
developed economies. The other reason behind this is the use
of labor intensive techniques and slow rate of acceptance to
innovation. Even though the capability standard of the country
is high, but due to the lack of speed in the transition process,
things need time. In the current scenario the country has grown
a lot and coming up as a major technological player among the
others in the world.

Conclusion
These are the major characteristic feature of the Indian
economy. India is an active member in various economic
groups’ like-BRICS and G-20. Not only does India have the
potential in the form of human capital and other raw materials,
but is also technically advanced to support maximum growth in
the country. This is a true indicator of inviting foreign
investments and creating the best growth situation for both the
foreign and national crowds.