CHAP TER

7 Indian Economy

“India will be a global player in the digital economy”

–Sunder Pichai, CEO Google

LEARNING OBJECTIVES

1 To understand the current status of the Indian Economy in terms of features,

Natural resources, infrastructure facilities and so on.

2 To understand the contributions of major Indian Economic

Thinkers.

7.1 Quality of Life Index (PQLI) and Gross

National Happiness Index (GNHI).
Meaning of Growth and
Development
Gross National Happiness Index
(GNHI)
A country’s economic growth is usually
measured by National Income, indicated The term “Gross National Happiness”
by Gross Domestic Product (GDP). was coined by the fourth king of
The GDP is the total monetary value of Bhutan, Jigme Singye Wangchuck, in
the goods and services produced by that 1972. It is an indicator of progress,
country over a specific period of time, which measures sustainable develop-
usually one year. ment, environmental conservation
promotion of culture and good
The level economic development
governance.
is indicated not just by GDP, but by an
increase in citizens’ quality of life or
well-being. The quality of life is being On the basis of the level of economic
assessed by several indices such as Human development, nations are classified as
Development Index (HDI), Physical developed and developing economies.

Indian Economy 143

Developed economies are those countries
which are industrialised, utilise their Features of a Developed Economy
resources efficiently and have high per capita 1) High National Income
income. The USA, Canada, U.K, France, and 2) High Per Capita Income
Japan are some of the developed economies.
3) High Standard of Living
Developed economies are also termed as
Advanced Countries. On the other hand, 4) Full Employment of Resources
countries which have not fully utilized their 5) Dominance of Industrial Sector
resources like land, mines, workers, etc., 6) High Level of Technology
and have low per capita income are termed
7) High Industrialisation
as under developed economies. Examples of
underdeveloped countries are Sub Saharan 8) High ConsumptionLevel
Africa, Bangla Desh, Myanmar, Pakistan, 9) High Level of Urbanisation
Indonesia etc.They are also termed as 10) Smooth Economic Growth
Undeveloped Countries or Backward
11) Social Equity, Gender Equality
Nations or Third World Nations.
and Low Levelsof Poverty
12) Political Stability and Good
7.2 Governance
Indian Economy
The diametrically opposite features
GDP Growth Rate
of Indian Economy are discussed below in
Top 10 countries by GDP (normal) 2016 detail.
Source : IMF (Outlook October 2016 )
20000
18000
16000
14000
7.3
12000
Features of Indian
Billion dollar

10000
8000 Economy
6000
4000
2000
7.3.1 Strengths of Indian
Economy
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Diagram 7.1
1. India has a mixed economy
Indian economy is the Seventh largest
economy of the world. Being one of Indian economy is a typical example
the top listed countries. In terms of of mixed economy. This means both
industrialization and economic growth, private and public sectors co-exist and
India holds a robust position with an function smoothly. On one side, some
average growth rate of 7% (approximately). of the fundamental and heavy industrial
Even though the rate of growth has units are being operated under the public
been sustainable and comparatively stable, sector,while, due to the liberalization of
there are still signs of backwardness. the economy, the private sector has gained

Indian Economy 144

importance. This makes it a perfect model Emerging as a top economic giant
for public – private partnership. among the world economy, India bags
2. Agriculture plays the seventh position in terms of nominal
the key role Gross Domestic Product (GDP) and third
in terms of Purchasing Power Parity (PPP).
Agriculture being the maximum pursued As a result of rapid economic growth
occupation in India, it plays an important Indian economy has a place among the
role in its economy as well. Around G20 countries.
60% of the people in India depend
upon agriculture for their livelihood.
5. Fast Growing Economy
In fact, about 17% of our GDP today is
contributed by the agricultural sector. India’s economy is well known for high
Green revolution, ever green revolution and sustained growth. It has emerged as
and inventions in bio technology have the world’s fastest growing economy in
made agriculture self sufficient and the year 2016-17 with the growth rate of
also surplus production. The export 7.1% in GDP next to People’s Republic of
of agricultural products such as fruits, China.
vegetables, spices, vegetable oils, tobacco,
animal skin, etc. also add to forex earining 6. Fast growing Service Sector
through international trading.

3. An emerging market
India has emerged as vibrant economy
sustaining stable GDP growth rate even
in the midst of global downtrend. This
has attracted significant foreign capital
through FDI and FII.India has a high
potential for prospective growth. This also
Diagram 7.2
makes it an emerging market for the world.
The service sector, contributes a lion’s share
4. Emerging Economy of the GDP in India. There has been a high
rise growth in the technical sectors like
WORLD NATION IN G-20 Information Technology, BPO etc. These
1. Argentina 11. Italy sectors have contributed to the growth
2. Australia 12. Japan
of the economy. These emerging service
3. Brazil 13. Mexico
sectors have helped the country go global
4. Canada 14. Russia
and helped in spreading its branches around
5. China 15. Saudi Arabia
6. European Union
the world.
16. South Africa
7. France 17. South Korea
8. Germany 18. Turkey 7. Large Domestic consumption
9. India 19. United Kingdom
With the faster growth rate in the economy
10. Indonesia 20. United States
the standard of living has improved a lot.
Indian Economy 145
This in turn has resulted in rapid increase The human capital of India is young. This
in domestic consumption in the country. means that India is a pride owner of the
The standard of living has considerably maximum percentage of youth. The young
improved and life style has changed. population is not only motivated but
skilled and trained enough to maximize
the growth. Thus human capital plays
8. Rapid growth of Urban areas
a key role in maximizing the growth
Urbanization is a key ingredient of the prospects in the country. Also, this has
growth of any economy. There has been a invited foreign investments to the country
rapid growth of urban areas in India after and outsourcing opportunities too.
independence. Improved connectivity in
transport and communication, education
and health have speeded up the pace of 7.3.2 Weakness of Indian
urbanization. Economy
1. Large Population
9. Stable macro economy
India stands secondin terms of size of
The Indian economy has been projected population next to China and our country
and considered as one of the most stable is likely to overtake china in near future.
economies of the world. The current Population growth rate of India is very
year’s Economic survey represents the high and this is always a hurdle to growth
Indian economy to be a “heaven of rate. The population growth rate in India
macroeconomic stability, resilience and is as high as 1.7 per 1000.The annual
optimism. According to the Economic addition of population equals the total
Survey for the year 2014-15, 8%-plus population of Australia.
GDP growth rate has been predicted, with
actual growth turning out to be a little 2. Inequality and poverty
less (7.6%). This is a clear indication of a
There exists a huge economic disparity in
stable macroeconomic growth.
the Indian economy. The proportion of
income and assets owned by top 10% of
10. Demographic dividend Indians goes on increasing. This has led to
an increase in the poverty level in the society
and still a higher percentage of individuals
are living Below Poverty Line (BPL). As a
result of unequal distribution of the rich
becomes richer and poor becomes poorer.

3. Increasing Prices of
Essential Goods
Even though there has been a constant
growth in the GDP and growth

Indian Economy 146

opportunities in the Indian economy, „Sex-ratio
there have been steady increase in the „Life-expectancy at birth
prices of essential goods. The continuous
„Literacy ratio
rise in prices erodes the purchasing power
and adversely affects the poor people, a. Size of Population
whose income is not protected.
Table 7.1 Population Growth
4. Weak Infrastructure Census Population Average annual
Even though there has been a gradual Year (in crores) growth rate
improvement in the infrastructural 1901 23.84 -
development in the past few decades, there 1911 25.21 0.56
is still a scarcity of the basic infrastructure
1921 25.13 -0.03
like power, transport, storage etc.
1931 27.90 1.04
5. Inadequate Employment 1941 31.87 1.33
generation 1951 36.11 1.25
With growing youth population, there 1961 43.92 1.96
is a huge need of the employment 1971 54.81 2.20
opportunities. The growth in production 1981 68.33 2.22
is not accompanied by creation of job.
1991 84.33 2.16
The Indian economy is characterized by
‘jobless growth’. 2001 102.70 1.97
2011 121.02 1.66
6. Outdated technology (Source: Registrar General of India)

The level of technology in agriculture and

Over a period of 100 years, India has
small scale industries is still outdated and
quadrupled its population size. In terms
obsolete.
of, size of population, India ranks 2nd
in the world after China. India has only
about 2.4% of the world’s geographical
7.3.3 Demographic trends in
area and contributes less than 1.2% of the
India
world’s income, but accommodates about
Scientific study of the characteristics of 17.5% of the world’s population. In other
population is known as Demography. The words, every 6th person in the world is an
various aspects of demographic trends in Indian. Infact, the combined population of
India are: just two states namely, Uttar Pradesh and
„Size of population Maharashtra is more than the population
of United States of America, the third most
„Rate of growth
populous country of the world. Some of
„Birth and death rates the states in India have larger population
„Density of population than many countries in the world.
Indian Economy 147
 The negative growth during has declined from 27.4 in 1951 to 7.1 in 2011.
1911-21 was due to rapid and frequent However, from the data it is clear that the fall
occurrence of epidemics like cholera, in birth rates is less than that of death rates.
plague and influenza and also famines. Kerala has the lowest birth rate (14.7)
The year 1921 is known as the ‘Year of and Uttar Pradesh has the highest birth rate
Great Divide’ for India’s population as (29.5). West Bengal has the lowest death
population starts increasing. rate (6.3) and Orissa (9.2) has the highest.
During 1951, population growth Among States Bihar has the highest decadal
rate has come down from 1.33% to 1.25%. (2001-11) growth rate of population, while
Hence it is known as ‘Year of Small divide’. Kerala has the lowest growth rate. The four
In 1961, population of India states Bihar, Madhya Pradesh, Rajasthan
started increasing at the rate of 1.96% and Uttar Pradesh called BIMARU states
i.e, 2%. Hence 1961 is known as ‘Year of have very high population.
Population Explosion’. In the year 2001,
the Population of India crossed one billion c. Density of population
(100 crore) mark. It refers to the average number of persons
The 2011 census reveals growth of residing per square kilometre. It represents
youth population which is described as the man- land ratio. As the total land area
‘demographic transition’. remains the same, an increase in population
causes density of population to rise.
b. Birth rate and death rate
Density of population
Crude Birth rate: It refers to the number
Total population
of births per thousand of population. =
Land area of the region
Crude Death rate: It refers to the number
of deaths per thousand of population Table 7.3 Dens
i ty of population
Crude birth and death rates of India Year Density of population
during various years (No. of persons per sq. km)
Table 7.2 1951 117
Birth rate and death rate 2001 325
Year C.B.R C.D.R. 2011 382
1951 39.9 27.4 (Source: Registrar General of India)

2001 25.4 8.4 Just before Independence, the density of

2011 21.8 7.11 population was less than 100. But after
(Source: Source: Registrar General of India) independence, it has increased rapidly
from 117 in 1951 to 325 in 2001. According
Birth rate was 39.9 in 1951; it fell to 21.8 in to 2011 census, the present Density of
2011. Although the birth rate has declined, the population is 382. Thus, the pressure of
decline is not so remarkable. The death rate population on land has been rising. Kerala,
Indian Economy 148
West Bengal, Bihar and Uttar Pradesh have expectancy is high when death rate is low
density higher than the India’s average and / or instances of early death are low.
density. Bihar is the most densely populated
state in the country with 1,102 persons Table 7.5 Life Expec
t enc
y
living per sq.km followed by West Bengal Year Male Female Overall
with 880. Arunachal Pradesh has low
density of population of only 17 persons. 1951 32.5 31.7 32.1
1991 58.6 59.0 58.7
d. Sex ratio 2001 61.6 63.3 62.5
It refers to the number of females per 2011 62.6 64.2 63.5
1,000 males. It is an important indicator (Source: Registrar General of India)
to measure the extent of prevailing equity
between males and females at a given During 1901 – 11, life expectancy was
point of time. just 23 years. It increased to 63.5 years
in 2011. A considerable fall in death rate
Table 7.4 Sex Ratio is responsible for improvement in the
Census year Sex ratio life expectancy at birth. However the life
(Number of females per expectancy in India is very low compared
1000 males) to that of developed countries.
1951 946
f. Literacy ratio
2001 933
It refers to the number of literates as a
2011 940 percentage of the total population. In
(Source: Source: Registrar General of India) 1951, only one-fourth of the males and
one-twelfth of the females were literates.
In India, the sex ratio is more favourable to Thus, on an average, only one-sixth of the
males than to females. In Kerala, the adult people of the country were literates. In
sex ratio is 1084 as in 2011. The recent 2011, 82% of males and 65.5% of females
census (2011) shows that there has been a were literates giving an overall literacy
marginal increase in sex ratio. Haryana has rate of 74.04% (2011). When compared
the lowest sex ratio of 877 (2011) among to other developed countries and even Sri
other states, while Kerala provides better Lanka this rate is very low.
status to women as compared to other
States with 1084 females per 1000 males Table 7.6 Literac
y ratio
Census Literate Males Females
e. Life expectancy at birth
year persons
It refers to the mean expectation of life at 1951 18.3 27.2 8.9
birth. Life expectancy has improved over
2001 64.8 75.3 53.7
the years. Life expectancy is low when
death rate is high and / or instances of early 2011 74.04 82.1 65.5
death are high. On the other hand, life (Source: Registrar General of India)

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Kerala has the highest literacy ratio (92%) According to Agricultural Census,
followed by Goa (82%), Himachal Pradesh the area operated by large holdings (10
(76%), Maharastra (75%) and Tamil Nadu hectares and above) has declined and area
(74%). Bihar has the lowest literacy ratio operated under marginal holdings (less
(53%) in 2011. than one hectare) has increased. This
indicates that land is being fragmented
and become ineconomic.
7.4
Natural Resources
7.4.2 Forest Resources

Any stock or reserve that can be drawn India’s forest cover in 2007 is 69.09 million
from nature is a Natural Resource. The hectare which constitutes 21.02 per cent of the
major natural resources are - land, forest, total geographical area. Of this, 8.35 million
water, mineral and energy. India is rich hectare is very dense forest, 31.90 million
in natural resources, but majority of the hectare is moderately dense forest and the rest
Indians are poor. Nature has provided 28.84 million hectare is open forest.
with diverse climate, several rivers for
irrigation and power generation, rich 7.4.3 Important Mineral
minerals, rich forest and diverse soil. Resources
a. Iron-Ore
Types of Natural resources India possesses high quality iron-ore in
abundance. The total reserves of iron-ore
(a) Renewable Resources: Resources
in the country are about 14.630 million
that can be regenerated in a
tonnes of haematiteand 10,619 million
given span of time. E.g. forests,
tonnes of magnetite. Hematite iron is
wildlife, wind, biomass, tidal,
mainly found in Chattisgarh, Jharkhand,
hydro energies etc.
Odisha, Goa and Karnataka.The major
(b) Non-Renewable Resources: deposit of magnetite iron is available at
Resources that cannot be western coast of Karnataka. Some deposits
regenerated. E.g. Fossil fuels- of iron ore are also found in Kerala, Tamil
coal, petroleum, minerals, etc. Nadu and Andhra Pradesh.

b. Coal and Lignite

7.4.1 Land Resources Coal is the largest available mineral
In terms of area India ranks seventh in resource. India ranks third in the world
the world with a total area of 32.8 lakh after China and USA in coal production.
sq. km. It accounts for 2.42% of total area The main centres of coal in India are the
of the world. In absolute terms India is West Bengal, Bihar, Madhya Pradesh,
really a big country. However, land- man Maharashtra,Odisha and Andhra Pradesh.
ratio is not favourable because of the huge Bulk of the coal production comes from
population size. Bengal-Jharkhand coalfields.
Indian Economy 150
c. Bauxite The new Kimberlile fields have been
discovered in Raipur and Pastar districts
Bauxite is a main source of metal
of Chhattisgarh, Nuapada and Bargarh
like aluminium. Major reserves are
districts of Odisha, Narayanpet – Maddur
concentrated in the East Coast bauxite
Krishna areas of Andhra Pradesh and
deposits of Odisha and Andhra Pradesh.
Raichur-Gulbarga districts of Karnataka.
d. Mica
Mica is a heat resisting mineral which 7.5
is also a bad conductor of electricity. It
Infrastructure
is used in electrical equipments as an
insulator. India stands first in sheet mica
production and contributes 60% of mica Infrastructural development means the
trade in the world. The important mica development of many support facilities.
bearing pegmatite is found in Andhra These facilities may be divided into (a)
Pradesh, Jharkhand, Bihar and Rajasthan. economic infrastructure and (b) social
infrastructure. Economic infrastructure
includes - transport, communication,
e. Crude Oil
energy, irrigation, monetary and financial
Oil is being explored in India at many places institutions. Social infrastructure includes
of Assam and Gujarat. Digboi, Badarpur, - education, training and research, health,
Naharkatia, Kasimpur, Palliaria, Rudrapur, housing and civic amenities.
Shivsagar, Mourn (All in Assam) and Hay
of Khambhat, Ankaleshwar and Kalol (All
in Gujarat) are the important places of oil 7.6
exploration in India.
Economic
Infrastructure
f. Gold
India possesses only a limited gold reserve. Economic infrastructure is the support
There are only three main gold mine system which helps in facilitating
regions—Kolar Goldfield, Kolar district production and distribution. For instance,
and Hutti Goldfield in Raichur district railways, trucks, posts and telegraph
(both in Karnataka) and Ramgiri Goldfield offices, ports, canals, power plants, banks,
in Anantpur district (Andhra Pradesh). insurance companies etc. are all economic
infrastructure of an economy. They help
g. Diamond in the production of goods and services.
As per UNECE the total reserves of
diamond is estimated at around 4582,
thousand carats which are mostly available 7.6.1 Transport
in Panna(Madhya Pradesh),Rammallakota
For the sustained economic growth of a
of Kurnur district of Andhra Pradesh
country, a well-connected and efficient
and also in the Basin of Krishna River.
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transport system is needed. India has
7.6.2 Energy
a good network of rail, road, coastal
shipping, and air transport. The total Electrical energy is one of the necessary
length of roads in India being over 30 components of our life. Nowadays, without
lakh km, India has one of the largest electricity, we cannot survive in this
road networks in the world. In terms of world of technology. The energy sources
railroads, India has a broad network of are classified under two heads based on
railroad lines, the largest in Asia and the the availability of the raw materials used,
fourth largest in the world. The total rail while generating energy.
route length is about 63,000 km and of
1. Non-renewable energy sources
this 13,000 km is electrified. The major
Indian ports including Calcutta, Mumbai, 2. Renewable energy sources
Chennai, Vishakhapatnam and Goa
handle about 90% of sea- borne trade and 1. Non-renewable energy sources
are visited by cargo carriers and passenger As the name suggests, the sources
liners from all parts of the world. A of energy which cannot be renewed
comprehensive network of air routes or re-used are called non-renewable
connects the major cities and towns of energy sources. Basically these are
the country. The domestic air services are the energy sources which will get
being looked after by Indian Airlines and exhausted over a period of time.
private airlines. The international airport Some of the examples of this kind of
service is looked after by Air India. resources are coal, oil, gas etc.
2. Renewable energy sources

Indian Railways Provide Wi-Fi These are the kind of energy source
Facility First in India is Bangalore which can be renewed or reused again
Railway Station and again. These kinds of materials
do not exhaust or literally speaking
these are available in abundant or
infinite quantity. Example for this
Air India and Indian Airlines were kind include
merged on August 27, 2007 to from 1. Solar energy
National Aviation Company of India
2. Wind energy
Ltd. (NACIL)
3. Tidal energy
4. Geothermal energy

The National Harbour board was 5. Biomass energy

set up in1950 to advise the Central Sometimes renewable sources are also
and State Governments on the called non-conventional sources of energy
management and development of since, these kinds of materials or these
ports, particularly minor ports ways of energy production were not used
earlier or conventionally.
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 7.7 The education system in India
consists of primarily six levels:
Social Infrastructure
„Nursery Class
Social infrastructure refers to those „Primary Class
structures which are improving the quality „Secondary Level
of manpower and contribute indirectly „Higher Secondary Level
towards the growth of an economy.
„Graduation
These structures are outside the system
of production and distribution. The „Post-Graduation
development of these social structures
help in increasing the efficiency and c. Education Institutions in India:
productivity of manpower. For example, Education in India follows the 10+2
schools, colleges, hospitals and other pattern. For higher education, there
civic amenities. It is a fact that one of are various State run as well as private
the reasons for the low productivity of institutions and universities providing
Indian workers is the lack of development a variety of courses and subjects. The
of social infrastructure. The status and accreditation of the universities is decided
developments in the social infrastructure under the University Grant Commission
in India are discussed below. Act. The Education Department consists of
various schools, colleges and universities
7.7.1 Education imparting education on fair means for all
sections of the society. The budget share of
a. Education in India the education sector is around 3% of GDP,
Imparting education on an organized of this largest proportion goes for school
basis dates back to the days of ‘Gurukul’ education. However, per pupil expenditure
in India. Since then the Indian education is the lowest for school students.
system has flourished and developed with
the growing needs of the economy. The 7.7.2 Health
Ministry & Human Resource Development
a. Health in India
(MHRD) in India formulates education
policy in India and also undertakes Health in India is a state government
education programs. responsibility. The Central Council Of
Health and Welfare formulates the various
b. Education system in India health care projects and health department
Education in India until 1976 was the reform policies. The administration of
responsibility of the State governments. health industry in India as well as the
It was then brought under concurrent technical needs of the health sector are the
list (both Centre and State). The Centre responsibility of the Ministry Of Health
is represented by the Ministry of Human And Welfare.
Resource Development decides the India’s Health care in India has many
education budget. forms. These are the ayurvedic medicine
Indian Economy 153
practice, unani or galenic herbal care, support of life. Since rain provides food,
homeopathy, allopathy, yoga, and many it forms the basis for stable economic life.
more. Each different healthcare form has Agriculture which is the most fundamental
its own treatment system and practice economic activity depends on rain,”It is rain
patterns. The medical practicing in India that both ruins and aids the ruined to rise”.
needs a proper licensing from the Ministry
of Health. All medical systems are now a. Factors of Production
under one ministry viz AYUSH.
Thiruvalluvar has made many passing
references about the factors of production
b. Health Care Services in India: viz., Land, Labour, Capital, Organisation,
The health care services in India are mainly Time, Technology etc. He says, “Unfailing
the responsibility of the Ministry of Health. harvest, competent body of men, group of
State wise, health status is better in Kerala men, whose wealth knows no diminution, are
as compared to other States. Compared to the components of an economy”.(Kural 61)
other developed countries, India’s health
status is not satisfactory. India’s health b. Agriculture
status is poor compared to Sri Lanka.
According to Thiruvalluvar, agriculture is the
most fundamental economic activity. They
7.8 are the axle-pin of the world, for on their
prosperity revolves prosperity of other sectors
Contributions of Indian of the economy, “The ploughmen alone”, he
Economic Thinkers says “live as the freemen of the soil; the rest
are mere slaves that follow on their toil”(Kural
7.8.1 Thiruvalluvar 1032). Valluvar believes that agriculture is
superior to all other occupation.
The economic ideas of
Thiruvalluvar are found
c. Public Finance
in his immortal work,
Thirukkural, a book Thiruvalluvar has elaborately explained
of ethics. Even though Public Finance under the headings Public
scholars differ widely Revenue, Financial Administration and
over the estimation of the Public expenditure. He has stated these
period of Thiruvalluvar, it is generally believed as 1) Creation of revenue, 2) Collection
that, he belongs to the Sangam age in Tamil of revenue, 3) Management of revenue
Nadu around third century A.D. Thiruvalluvar’s 4) Public expenditure
work is marked by pragmatic idealism.
A large part of Valluvar’s economic d. Public Expenditure
ideas are found in the second part of Valluvarhas recommended a balanced budget.
Thirukkural, the porutpal. It deals with “ It is not a great misfortune for a state if its
wealth. Thiruvalluvaris a fundamental revenues are limited, provided the expenditure
thinker. He believes that rains are the basic is kept within bounds.” He has given certain

Indian Economy 154

guidelines for a budgetary policy. “Budget 3) good crop 4) prosperity and happiness
for a surplus, if possible, balances the budget and 5) full security for the people.
at other times, but never budget for a deficit.”
Valluvar advocates the following main items 7.8.2 Mahatma Gandhi
of public expenditure: 1) Defence 2) Public
Works and 3) Social Services. Gandhian Economics is
based on ethical foundations.
e. External Assistance In 1921, Gandhi wrote,
“Economics that hurts the
Valluvar was against seeking external
moral well-being of an
assistance. According to Kural No. 739,
individual or a nation is immoral, and
countries taking external assistance are not
therefore, sinful.” Again in 1924, he repeated
to be considered as countries at all. In other
the same belief: “that economy is untrue
words, he advocated a self-sufficient economy.
which ignores or disregards moral values”.

f. Poverty and Begging Salient Features of Gandhian

Valluvar consideres freedom from hunger Economic Thought
as one of the fundamental freedoms 1. Village Republics: To Gandhi, India
that should be enjoyed by every citizen. lives in villages. He was interested
According to him ‘poverty’ is the root in developing the villages as self-
cause of all other evils which would lead to sufficient units. He opposed extensive
ever-lasting sufferings. It is to be noted that use of machinery, urbanization and
the number of people living below poverty industrialization.
line, begging, sleeping on the roadsides and 2. On Machinery: Gandhi described
rag picking in India has been increasing. machinery as ‘Great sin’. He said that
“Books could be written to demonstrate
g. Wealth its evils… it is necessary to realize that
Valluvar has regarded wealth as only a machinery is bad. Instead of welcoming
means and not an end. He said, “Acquire machinery as a boon, we should look upon
a great fortune by noble and honorable it as an evil. It would ultimately cease.
means.” He condemned hoarding and 3. Industrialism: Gandhi considered
described hoarded wealth as profitless industrialism as a curse on mankind. He
richness. To him industry is real wealth thought industrialism depended entirely
and labour is the greatest resource. on a country’s capacity to exploit.
4. Decentralization: He advocated
h. Welfare State a decentralized economy, i.e.,
Thiruvalluvar is for a welfare state. In a welfare production at a large number of
state there will be no poverty illiteracy, places on a small scale or production
disease and industry. The important elements in the people’s homes.
of a welfare state are 1) perfect health of the 5. Village Sarvodaya: According to
people without disease 2) abundant wealth, Gandhi, “Real India was to be found in
Indian Economy 155
 villages and not in towns or cities.” So
7.8.3 Jawaharlal Nehru
he suggested the development of self-
sufficient, self-dependent villages. Jawaharlal Nehru,
6. Bread Labour: Gandhi realized one of the chief
the dignity of human labour. He builders of Modern
believed that God created man to eat India, was the first
his bread by the sweat of his brow. Prime Minister of
Bread labour or body labour was the Independent India and he was there in
expression that Gandhi used to mean that post till his death in 1964. He was a
manual labour. great patriot, thinker and statesman. His
7. The Doctrine of Trusteeship: views on economics and social problems
Trusteeship provides a means of are found in the innumerable speeches he
transforming the present capitalist made and in the books he wrote.
order of society into an egalitarian
a. Democracy and Secularism
one. It gives no quarter to capitalism.
However, now India experiences both Jawaharlal Nehru was a firm believer in
casino capitalism and crony capitalism democracy. He believed in free speech
8. On the Food Problem: Gandhi was civil liberty,adult franchise and the Rule
against any sort of food controls. He of Law and Parliamentary democracy.
thought such controls only created Secularism, is another signal contribution
artificial scarcity. Once India was of Nehru to India. In our country,
begging for food grain, but India tops there are many religions - Hinduism,
the world with very large production Islam, Christianity, Buddhism, Jainism,
of foodgrains, fruits, vegetables, Zoroastrianism, Sikhism and so on.
milk, egg,meat etc., But there is no domination by religious
majority. Secularism means equal respect
9. On Population: Gandhi opposed for all religions.
the method of population control
through contraceptives. He was, b. Planning
however, in favour of birth control
Jawaharlal Nehru was responsible for the
through Brahmacharya or self-
introduction of planning in our country. To
control. He considered self-control
Jawaharlal Nehru, the Plan was essentially
as a sovereign remedy to the problem
an integrated approach for development.
of over-population.
Initiating the debate on the Second Plan
10. On Prohibition: Gandhi advocated in the Lok Sabha in May 1956, Nehru
cent per cent prohibition. He regarded spoke on the theme of planning. He said,
the use of liquor as a disease rather “the essence of planning is to find the best
than a vice. He felt that it was better for way to utilize all resources of manpower, of
India to be poor than to have thousands money and so on.” Planning for Nehru was
of drunkards. But ,now many states essentially linked up with industrialization
depend on revenue from liquor sales. and eventual self-reliance for the country’s

Indian Economy 156

economic growth on a self- accelerating degree in 1921. And his theis“ The Problem
growth. Nehru carried through this basic of the Rupee” was accepted for the award
strategy of planned development. Nehru’s of the D.Sc degree by the London School of
contribution to the advancement of science, Economics in 1923. It is a miracle that RBI
research, technology and industrial was conceptualized as per the guidelines
development cannot be forgotten. It was presented by Ambedkar in his book, “The
during his period, many IITs and Research Problem of the Rupee;Its origin and its
Institutions were established. He always solution”. The main economic ideas of
in insited on “scientific temper”. Ambedkar may be studied under four broad
headings:
c. Democratic Socialism 1. Financial Economics
Socialism is another contribution of Nehru Much of the work done by Ambedkar
to India. He put the country on the road during his stay abroad mostly
towards a socialistic pattern of society. But during the period 1913-1923, was
Nehru’s socialism is democratic socialism. in the field of Finance Economics.
Ambedkar divided the evolution of
7.8.4 B. R. Ambedkar provisional finance into three stages:
(i). Budget by Assignment (1871-72
B. R. Ambedkar (1891- to 1876-77); (ii) Budget by Assigned
1956) was a versatile Revenue (1877-78 to 1881-82); and
personality. He was (iii) Budget by Shared Revenues
the architect of the (1882-83 to 1920-1921).
Indian Constitution, 2. Agricultural Economics
a custodian of social In 1918, Ambedkar published a paper
justice and a champion “Small Holding in India and their
of socialism and state Remedies”. Citing Adam Smith’s ‘Wealth
planning. Ambedkar’s of Nations”, he made a fine distinction
writings included between “Consolidation of Holdings”
“Ancient Indian Commerce” (a thesis and “Enlargement of Holdings”.
submitted to the Columbia University for the
3. Economics of Caste
award of the Mater of Arts Degree in 1915),
‘National Dividend of India: A Historical Ambedkar believed that caste was an
and Analytical Study (a thesis for which he obstacle to social mobility. It resulted
was awarded Ph.D). His thesis was published in social stratification. He was of
as ‘The Evolution of Provincial Finance the firm view that individuals must
in British India: A Study of the Provincial be free to change their occupations.
Decentralization of Imperial Finance”. Moreover, the caste system caused
social tensions. The caste system
Ambedkar’s thesis on “Provincial
has resulted in the absence of social
Decentralization of Imperial Finance in
democracy in India as distinct from
British India” was accepted for the M. Sc
political democracy.

Indian Economy 157

4. Economics of Socialism development, competition and efficiency
Ambedkar was a socialist. He was in free-market economies. Gandhi and
a champion of state socialism. He Kumarappa envisioned an economy focused
advocated the nationalization of all on satisfying human needs and challenges
key industries and suggested state while rooting out socio-economic conflict,
ownership of land and collective unemployment, poverty and deprivation.
farming. He was for state monopoly Kumarappa worked as a Professor
of insurance business. Not only that, of economics at the Gujarat Vidyapith in
he advocated compulsory insurance Ahmedabad, while serving as the editor of
for every citizen. Young India during the Salt Satyagraha. He
There is no doubt that Ambedkar was founded the All India Village Industries
a great economist. But his academic Association in 1935; and was imprisoned
work as an economist was eclipsed for more than a year during the Quit India
by his greater contributions in the movement. He wrote during his imprisonment,
field of law and politics. Above all he Economy of Permanence: The Practice and
was a great social reformer. Precepts of Jesus (1945) and Christianity: Its
Economy and Way of Life (1945).
7.8.5 J. C. Kumarappa Several of Gandhi’s followers
developed a theory of environmentalism.
Joseph Chelladurai
Kumarappa took the lead in a number of
Kumarappa was born
relevant books in the 1930s and 1940s.
on 4 January 1892
Historian Ramachandra Guha calls
in Tanjavur, Tamil
Kumarappa, “The Green Gandhian,”
Nadu. A pioneer of
portraying him as the founder of modern
rural economic development theories,
environmentalism in India.
Kumarappa is credited for developing
economic theories based on Gandhism – Kumarappa worked for the Planning
a school of economic thought he coined Commission of India and the Indian National
“Gandhian Economics”. Congress to develop national policies for
agriculture and rural development. He also
Gandhian Economics travelled to China, Eastern Europe and
J.C.Kumarappa strongly supported Japan on diplomatic assignments and to
Gandhi’s notion of village industries and study their rural economic systems.
promoted Village Industries Associations.
Kumarappa worked to combine Christian
7.8.6 V.K.R.V. Rao
and Gandhian values of “trusteeship”, non-
violence and a focus on human dignity According to P.R. Brahmananda, “ the great
and development in place of materialism trinity of pre- independent and post independent
as the basis of his economic theories. Indian economists consisted of D.R.Gadgill,
While rejecting socialism’s emphasis on C.N.Vakil and V.K.RV. Rao. These scholars
class war and force in implementation, were imbibed with a missionary zeal and
he also rejected the emphasis on material analyzed the Indian economic problems with
Indian Economy 158
a view to designing and international attack on world poverty,
propagating economic not only through his contributions to
policies/programmes the question of international aid and
and plans to India’s improved flows of external resources,
national advantage.” but also through his activities in the
V.K.R.V: Rao was a field of food aid.
prolific writer. 3. Support for Socialism
V.K.R.V: Rao was deeply interested During the early phases of planning
in three large themes. They were: in India, Rao supported the case of a
i. National Income, socialist India, where the state would
ii. Food, nutrition and the distribution control the commanding heights of
of good; and the economy and the public sector
would play a dominant role in
iii. Employment and occupational
economic development.
distributions.
4. Rao’s Views on Industrialization
1. National Income Methodology
As an applied economist, Rao’s name In his pamphlet “What is wrong with
is remembered for his pioneering Indian Economic Life?’ (1938), Rao
work on the enumeration of national gave the following reasons for low
income of India. Rao was a pupil per capita income and low levels of
of J.M. Keynes and he worked with per capita nutrition in India.
Colin Clark. H.W Singer considered i. Uneconomic holdings with sub-
V.K.R.V Rao as “ the best equipped divisions and fragmentation;
of all Keynes’ pupils. He attempted ii. Low levels of water availability for crops;
(i) to develop the national income iii. Excess population pressure on
concepts suited to India and agriculture due to the absence of a
developing countries generally; (ii) large industrial sector;
to analyze the concepts of investment,
iv. Absence of capital;
saving and the multipliers in an
underdeveloped economy; and (iii) v. Absence of autonomy in currency
to study the compatibility of the policy, and in general in monetary
national incomes of industrialized matters encouraging holding of gold.
and underdeveloped countries. 5. Village Clusters
Rao’s paper on “Full Employment
Rao felt that rural communities had
and Economic Development” was
to be given a viable base.Therefore
one of the earliest contributions in
he suggested that a cluster of
the field of development towards
villages should form a unit for rural
employment.
development, so that both social
2. International Food Aid and economic interactions between
Rao was influential in creating villages could develop, and they
ideas and shaping policy in the could effectively generate and fashion
Indian Economy 159
 their own development with a more and drew attention to the incidence of
meaningful participation by people. absolute and relative deprivation.
6. Investment, Income and Multiplier 2. Poverty and Inequality
Rao’s examination of the “interrelation Sen has carried out massive work
between investment, income and on poverty and inequality in
multiplier in an under developed India. Sen’s major point has been
economy” (1952) was his major that the distribution of income/
contribution to macroeconomic consumption among the persons
theory. As a thinker, teacher, below the poverty line is to be taken
economic adviser and direct policy into account.
maker, V.K.R.V. Rao followed the 3. The Concept of Capability
footsteps of his great teacher, John
The concept of capabilities developed
Maynard Keynes.
by Sen has been cited as a better
7. Institution Builder index of wellbeing than commodities
He founded three national level or utilities. Capability, as defined
research institutes namely Delhi by Sen, is the ability to transform
School of Economics, Institute of Rawlsian primary goods to the
Economic Growth (both at Delhi) achievement of wellbeing.
and Institute for Social and Economic 4. Entitlement
Change (Bangalore)
Sen has included the concept of
entitlement items like nutrition,
food, medical and health care,
7.8.7 Amartya Kumar Sen
employment, security of food
The Nobel citation supply in times of famine etc. He
refers to Sen’s considered famine as arising out of
contributions to the failure of establishing a system of
social choice theory, entitlements.
development 5. Choice of Technique
economics, study on poverty and famines Sen’s ‘Choice of Technique ‘ was a
and concept of entitlements and capability research work where he argued that in
development (1998). a labour surplus economy, generation
1. Poverty and Famines of employment cannot be increased
Sen's Poverty and Famines: An Essay at the initial stage by the adaptation
on Entitlement and Deprivation” of capital- intensive technique.
(1981) is both a theoretical and an Conclusively, Amartyasen, more
applied work. In the book, several than just an economist, is an ethical
famines have been studied in the philosopher. He is a lover of freedom
working of a general theoretical and a humanist. He has focused on the
framework from an original angle. He poor, viewing them not as objects of
examined various meanings of poverty pity requiring charitable hand–outs,
Indian Economy 160
 but as disempowered folkneeding
empowerment, education,health, Per Capita Average national
nutrition, gender equality,safety net Income income per head
in times of distress; all are needed to of population. It is
empower people. obtained by dividing
the National Income by
population size.
7.9
Conclusion
Natural Goods and services
Resources provided by the nature.
This lesson mainly focused on some of
In other words, any
the aspects of the Indian Economy and
stock or reserve that
its resources, infrastructure facilities
can be drawn from
and energy, It also discussed the
nature.
principles of Indian Economic thinkers
to motivate the students to read good
books on Economics Written by the great Renewable Resources that can be
economists. Resources regenerated in a given
span of time.
Glossary
Non- Resources that are
Economic Transformation of an Renewable exhaustive and cannot
Growth economy from a state of Resources be regenerated
under development to
a state of development Deforestation Clearing of forests,
which is measured trees and thereby forest
by Gross Domestic land is converted to a
Product (GDP). non-forest use.
Economic An improvement in
Development citizens quality of Energy Crisis Situation in which
life and well being energy resources are
of a country which less than the demand
is measured by per and there is shortage of
capita income along energy.
with several other
development indicators.
Doctrine of Doners who act as
Gross Total monetary value
Trusteeship the trustees of their
Domestic of the goods and
property or business.
Product services produced by
that country over a
specific period of time,
normally a year.
Indian Economy 161
 MODEL QUESTIONS

Part-A Multiple Choice Questions

1. The main gold mine region in 6. The weakness of Indian Economy is

Karnadaka is ……….. …….
a. Kolar a. Economic disparities
b. Ramgiri b. Mixed economy
c. Anantpur c. Urbanisation
d. Cochin d. Adequate employment
2. Economic growth of a country opportunities
is measured by national income
7. A scientific study of the characteristics
indicated by …..
of population is ….
a. GNP b. GDP
a. Topography
c. NNP d. Per capita income
b. Demography
3. Which one of the following is a
c. Geography
developed nations ?
d. Philosophy
a. Mexico
b. Ghana 8. The year 1961is known as …..
c. France a. Year of small divide
d. Sri Lanka b. Year of Population Explosion

4. The position of Indian Economy c. Year of Urbanisation

among the other strongest economies d. Year of Great Divide
in the world is ..
9. In which year the population of India
a. Fourth
crossed one billion mark ?
b. Sixth
a. 2000 b. 2001
c. Fifth
c. 2005 d. 1991
d. Tenth
10. The number of deaths per thousand
5. Mixed economy means …… population is called as …
a. Private sectors and banks a. Crude Death Rate
b. Co-existence of Public and Private b. Crude Birth Rate
sectors
c. Crude Infant Rate
c. Public sectors and banks
d. Maternal Mortality Rate
d. Public sectors only

Indian Economy 162

11. The number of births per thousand 16. Ambedkar the problem studied by in
population is called as the context of Indian Economy is …….
a. Crude death rate a. Small land holdings and their
b. Mortality rate remedies

c. Morbidity rate b. Problem of Indian Currency

d. Crude Birth Rate c. Economics of socialism

d. All of them
12. Density of population =
a. Land area / Total Population 17. Gandhian Economics is based on the
Principle
b. Land area / Employment
a. Socialistic idea
c. Total Population / Land area of the
region b. Ethical foundation

d. Total Population / Employment c. Gopala Krishna Gokhale

d. Dadabhai Naoroji
13. Who introduced the National
Development Council in India? 18. V.K.R.V Rao was a student of
a. Ambedkar a. J.M. Keynes
b. Jawaharlal Nehru b. Colin Clark
c. Radhakrishanan c. Adam smith
d. V.K.R.V. Rao d. Alfred Marshal

14. Who among the following propagated 19. Amartya Kumara Sen received the
Gandhian Ecomomic thinkings. Nobel prize in Economics in the year
a. Jawaharlar Nehru a. 1998
b. VKRV Rao b. 2000
c. JC Kumarappa c. 2008
d. A.K.Sen d. 2010

15. The advocate of democratic socialism 20. Thiruvalluvar economic ideas mainly
was dealt with
a. Jawaharlal Nehru a. Wealth
b. P.C. Mahalanobis b. Poverty is the curse in the society
c. Dr. Rajendra Prasad c. Agriculture
d. Indira Gandhi d. All of them

Indian Economy 163

Part- A - Answers

1 2 3 4 5 6 7 8 9 10
a b c b b a b b b a
11 12 13 14 15 16 17 18 19 20
d c b c a b b a a d

Part-B Answer the following questions in one or two sentences.

II. Answer the following question in one 24. Point out any any one feature of Indian
or two. Economy

21. Write the meaning of Economic 25. Give the meaning of non-renewable
Growth energy

22. State any two features of developed 26. Give a short note on Sen’s ‘Choice of
economy Technique’.

23. Write the short note on natural 27. List out the reasons for low per capita
resources income as given by V.K.R.V. Rao.

Part C Answer the following questions in one paragraph.

28. Define Economic Development. 32. Write the V.K.R.V.Rao’s contribution

on multiplier concept.
29. State Ambedkar’s Economic ideas on
agricultural economics. 33. Write a short note on Welfare
Economics given by Amartya Sen.
30. Write on short note on village
sarvodhaya. 34. Explain Social infrastructure.

31. Write the strategy of Jawaharlal Nehru

in India’s planning.

Part D Answer the following questions in about a page

35. Explain strong features Indian 37. Bring out Jawharlal Nehru’s contribution
economy to the idea of economic development.

36. Write the importance of mineral 38. Write a brief note on the Gandhian
resources in India. economic ideas.

Indian Economy 164

 ACTIVITY
1. Visit a village nearby you and find out the number households
living without basic facilities

References

Indian
1. Ramesh
Economy
Singh-by
- Indian
Ramesh Singh 5th edition - McGraw Hill Publication
Economy
Indian
2. Gaurav
Economy
datt &-Datt
Aswani Mahajan - Datt & Sundharam Indian Economy 72nd edition
& Sundharam
- S.Chand
India’s Publication
Reforms: How They Produced Inclusive GrowthBy Jagdish Bhagwati; Arvind
3. Jagdish Bhagwati; Arvind Panagariya - India’s Reforms: How They Produced
Panagariya
Inclusive
Reforms Growth Transformation in IndiaBy Jagdish Bhagwati; Arvind Panagariya
and Economic
4. Jagdish
India: Bhagwati;GiantBy
The Emerging Arvind Arvind
Panagariya - Reforms and Economic Transformation in
Panagariya
India
http://www.economicsdiscussion.net/indian-economy/top-11-features-of-a-
5. Arvind Panagariya - India: The Emerging Giant
developing-economy/18987
http://www.economicsdiscussion.net/indian-economy/top-11-features-of-a-
developing-economy/18987

Indian Economy 165