INDIA AS UNDER-DEVELOPED ECONOMY

1)         Low per capita income-Compared with the developed countries of the west, India economy was appallingly poor in early 1950s.

            After Independence the government wanted to give a big push to the stand still economy and for this purpose, it employed the technique of democratic planning. With the efforts of the government, some development has taken place during the five decades of planning, but India still remains one of the most under developed countries in terms of per capita income.

            According to World Development Report 2006, India was one of the 45 low income economies in 2004.India’s PPP estimate of GNP per capita is around 1/10^th of the GNP of developed countries.

2)         Inadequate distribution of income: This is because private ownership of means of production inevitably leads to concentration of wealth in a few hands. We can see an increase of Gini Lorenz ratio.

3)         High incidence of poverty: The % of population below poverty line is about 50% in rural areas and 40% in urban areas in 1999-2000.

            Since 1970s there has been a decline in the incidence of poverty. Nevertheless, the % of population below the poverty line is still quite high.

4)         Predominance of agriculture: In 1951 abt70% of the population was employed in agriculture as against 65% in 1991.

            A 2^nd indicator of the predominance of agriculture in the Indian economy is the proportion of national income originating in this sector. In 2004 agriculture contributes 22% of the GDP as against 50 % in 1951.

5)         Rapid population growth and high dependency ratio: Population in India over the years has increased at the rate of 2.14% per annum. The country is at present passing through the 2^nd stage of demographic transition which is characterized by a falling death rate without a corresponding decline in birth rate.

            Over the years per head agriculture land has steadily increased in the country. The pressure of population on agricultural land in a country can be reduced only if it is possible to transfer some population to other sectors of economic activities. But in India, growth of industries and commerce has been sluggish and inter sectoral transfer of population has not been possible. Consequently, the pressure of population on agricultural land continues to grow swelling the no of disguised unemployed.

            Rapid population growth has resulted in a high dependency ration.

6)         Low level of human development: Human development is usually measured in terms of human development index (HDI), which is composed of 3 basic indicators-longevity, knowledge and standard of living.

             Longevity is measured by life expectancy at birth; knowledge by a combination of adult literacy (2/3^rd) and combined primary, secondary and tertiary ratios (1/3^rd) and standard of living is measured by GDP per capita (PPP). India with a HDI (Human Development Index) value of 0.602 ranks with a lowly 127 in terms of HDI.

7)         Unemployment: 

8)         Scarcity of capital: Low capital formation proportion rates means low rates of growth of national product, unless capital output ratio declines i.e., unless more output can be turned out per unit of capital.

            In the country has to grow, they have no choice except to raise their rates of capital accumulation. This has been India’s problem during last 5 decades.

            In 1950-51,the gross saving investment rate in this country was 9%. At this rate of capital formation, the country could not hope to record any impressive economic growth.

            In 1990-91, rates of gross domestic saving and gross domestic capital formation were 23% and 26% respectively.

            In 2004-05, these rates were 29% and 30% respectively.

            High rates of saving and capital formation allow an economy to grow at a fast rate, introduce latest technologies and become internationally competitive.

9)         Technological backwardness: There still exists a wide gap between the sophisticated production techniques of the developed countries and India’s technology

10)       Lack of entrepreneurs: