The economy of India is the 5th largest in the
world by nominal GDP and 3rd largest by
Purchasing Power Pariety (PPP).
Nature of the Indian Economy
(i) Mixed Economy Existence of both public
and private sectors. This term was coined
by Pat Mullins and Supported by JM Keynes.
(ii) Agrarian Economy Even after
six-decades of independence 58% of the
workforce of India is still agriculturist and
its contribution to GDP is around 17% at
Following are the features of Indian economy .
(i) Slow growth of national and per capita
income. (ii) Capital deficiency and low rate of
capital formation, hence low rate of
investment, low production, etc; poor quality
of human capital. (iii) Over- dependence on
agriculture alongwith low productivity in
agriculture; heavy population pressure. (iv)
Unequal distribution of income and wealth.
(v) Mass poverty, chronic inflation and
Broad Sectors of Indian Economy
Primary Sector Agriculture, forestry and
fishing, mining etc.
Secondary Sector manufacturing, electricity,
gas and water supply and construction.
Tertiary Sector (also called service sector)
business, transport, telecomm- unication,
banking, insurance, real estate, community
and personnel services.
Economic Planning in
Planning Commission (1950) was
set-up under the Chairmanship of
Pandit Jawaharlal Nehru (Gulzarilal
Nanda was the first Deputy Chairman).
Basic aim of Economic Planning is to
bring rapid economic growth through
agriculture, industry, power and all
other sectors of the economy.
NITI Aayog or National Institution for
Transforming India Aayog came into
existence on 1st January, 2015;
policy-making think-tank of
government that replaces Planning
Commission and aims to involve states
in economic policy making. It will
provide strategic and technical advice to
the Central and the State Governments.
The Prime Minister heads the Aayog as
its chairperson. Rajiv Kumar is the
Vice-Chairperson of NITI Aayog of India.
Planned Economy for India
(1934) M Visvesvaraya
National Planning Committee
(1938) Jawaharlal Nehru
Bombay Plan (1944)
Gandhian Plan (1944) SN Agarwal
People’s Plan (1945) MN Roy
Sarvodaya Plan (1950) JP Narayan
National Income in India
National Income refers to the aggregate value of goods and services produced in an economy in one year. Following are the measures of National Income in India
● Gross Domestic Product (GDP) is the final value of the goods and services produced within the geographical boundaries of a country during a year.
● Net Domestic Product (NDP) equals to the GDP minus depreciation (value loss of an asset) on country capital goods.
● Gross National Product (GNP) is an estimate of the total value of all the final products
and services produced in a given period (usually a year) by the nationals of a country.
● The Net National Product (NNP) is obtained by subtracting depreciation value from GNP.
● When NNP is obtained at factor cost it is called National Income. It is calculated by
deducting indirect taxes and adding subsidies in NNP at market price.
Indian Tax Structure
Direct Tax The term direct tax generally means a tax paid directly to the government by
the persons on whom it is imposed. e.g. income tax, Corporate income tax, capital gain tax,
stamp duty, land tax, estate duty, wealth tax, petroleum revenue tax. The government
earns maximum from corporate income tax.
Indirect Tax An indirect tax is a tax collected by an intermediary from the person who
bears the ultimate economic burden of the tax. e.g. sales tax or VAT, customs duty,
insurance premium tax, excise duties, landfill tax, electricity duty, climate change levy.
Goods and Service Tax (GST)
The GST as it is more commonly referred to is a system of taxation where there is a single
tax in the economy for goods as well as services. Indian GST was first proposed in India
in the Union Budget speech in 2006-07. This tax come into effect from 1 July, 2017.
The main feature of the GST is that there is a tax credit available at each stage of the value chain.
Human Development Index (HDI)
● HDI measure was given by Pakistani
Nobel Prize Winner, Mehbub-ul-Haq
● Level of Human development is
measured by Human Development
Index (HDI), published by UNDP since,
● Three dimensions
1. Life expectancy at birth;
2. Education Index comprising means
year of schooling and expected year
3. GNI per capita (PPP US $) Index.
● India has been ranked 129 out 189
countries on 2019’s HDI.
● NRHM (National Rural Health Mission)
was launched on 2nd April, 2005 to
reduce Infant Mortality Rate and
Maternal Mortality Rate.
● NUHM (National Urban Health Mission)
launched on 2013. Education
programmes like Sarva Shiksha Abhiyan,
Mid-Day Meal Scheme etc were
● Rural development programmes like
MGNREGA and Bharat Nirman.
● The erstwhile Planning Commission
estimated poverty rate based on data
collected by National Sample Survey
● Main Reasons for Rural Poverty Rapid
population growth, lack of capital, lack of
alternate employment other than poor
agriculture, illiteracy and lack of proper
implementation of PDS.
● Main Reasons for Urban Poverty
Migration from rural areas, lack of skilled
labour, lack of housing facilities, limited
job opportunities in cities.
● Based on 2400 calories (rural) and 2100
calories (urban) and monthly per capita
consumption expenditure of ` 454 (rural)
and ` 540 (urban), Planning Commission
(Now NITI Aayog) estimated poverty ratio
in India in 2004-05 was 27.5% and
according to the Suresh Tendulkar
Committee was 37.2%.
● The Tendulkar Committee stipulated a
benchmark of daily per capita
expenditure of ` 27 and ` 33 in rural and
urban areas, respectively.
Twenty Point Programme 1975
Indira Awaas Yojana 1985
Jawahar Rozgar Yojana 1989
Nehru Rozgar Yojana 1989
Swarna Jayanti Shahri Rozgar Yojana 1997
Pradhan Mantri Gramodaya Yojana 2000
Pradhan Mantri Gram Sadak Yojana 2000
Sampoorna Grameen Rozgar Yojana 2001
Bharat Nirman 2005
Jawaharlal Nehru National Urban
Prime Minister Employment
Mahatma Gandhi National Rural
National Rural Livelihood Mission
Nirmal Bharat Abhiyan 2012
Swachh Bharat Abhiyan 2014
Beti Bachao Beti Padhao 2014
Pradhan Mantri Jan Dhan Yojana 2015
Atal Pension Yojana 2015
Digital India Programme 2015
National Skill Development Mission 2015
HRIDAY (Heritage City Development
and Augmentation Yojana)
Smart City Mission 2015
AMRUT (Atal Mission for Rejuvenation
and Urban Transformation)
Pradhanmantri Jeevan Jyoti Beema
Pradhanmantri Suraksha Beema
Pradhan Mantri Krishi Sinchayee
Start-up and Stand-up Yojana 2016
Pradhan Mantri Fasal Bima Yojana 2016
Ujala Yojana 2016
It refers to a situation, when a person is
able and willing to work at the prevailing
wage rate, but does not get the opportunity
Estimation of Unemployment
Since 1973 on the recommendation of
B Bhagwati Committee, three estimates
of unemployment have been brought about
by Planning Commission, viz
1. Usual Principal Status Persons who
remained unemployed for a major part
of the year.
2. Current Weekly Status Persons who
did not find even an hour of work in a
week preciding the date of survey.
3. Current Daily Status Persons who did
not find work even for 1 hour in a day.
Mid-Day Meal Scheme 1995
Swayam Sidha 2001
Support to Training and Employ-
ment Programme for Women (STEP)
Integrated Child Protection Scheme 2009-10
Sabla Scheme 2010
National Mission for Empowerment
Bal Bandu Scheme 2011
Nai Roshni 2012
Beti Bachao Beti Padhao 2015
PM Ujjwala Yojna 2016
PM Matra Vandana Yojna 2017
● Agriculture is the mainstay of Indian
economy. It makes important
contribution in GDP, National Income,
employment, trade and industry.
● Green Revolution is associated with the
use of HYVS (High Yielding Variety
Seeds), chemical, fertilisers and new
technology, which led to a revolutionary
results in agricultural production.
● Dr. MS Swaminathan has been called
the ‘Father of Green Revolution’ in India.
Blue Fish Production
Golden Fibre Jute
Tricolour revolution has 3 components
● Saffron revolution–Solar energy
● White revolution–Cattle welfare
● Blue revolution–fisherman’s welfare
● Industrial policies were launched in
1948, 1956, 1977, 1980 and 1991.
● Industrial Policy 1956 is called
Economic Constitution of India and
gave public sector the strategic edge.
● Industrial Policy 1991 opened up the
economy. Its main aims were
(a) to end license-permit raj;
(b) to integrate Indian economy with
the outer world;
(c) to remove restrictions on FDI and
(d) to reform public sectors.
Public Sector Enterprises
● Industries requiring compulsory
licensing (a) distillation and brewing of
alcoholic drinks; (b) cigar and cigarettes
of tobacco; (c) electronic aerospace and
defence equipment; (d) industrial
explosives; (e) specific hazardous
● Areas reserved for public sector are
(a) atomic energy—production, separation
and enrichment of fissionable materials
and (b) railways.
● Present Policy on PSEs is to (a) not to
privatise profit-making companies and to
modernise and revive sick companies; (b)
not to bring government stake in PSEs
below 51%; (c) to adopt initial public
offering route to disinvestment.
Maharatnas, Navratnas, and
● To impart greater managerial and
commercial autonomy to the PSEs, the
concept of Maharatna, Navratna and
Miniratna was started.
● Maharatnas were started in 2009. Ten
Maharatnas are ONGC, SAIL, IOC,
NTPC, Coal India Ltd, BHEL, GAIL
(India) Ltd, and BPCL, HPCI and Power
● Navratnas Bharat Electronics Ltd, HAL,
MTNL, NALCO, National Mineral
Development Corporation, Nevyeli Lignite
Company Ltd, Oil India Ltd, Power
Finance Company Ltd, Rashtriya Ispat
Nigam Ltd, Rural Electrification
Corporation Ltd, Shipping Corporation of
India Ltd, CCIL, EIL and NBCCL.
● Miniratnas Public Sector Enterprises
(PSEs) that have made profit continuously
for the last three years and have positive
● At present there are 61 in category I and 12
in Category II.
Hazari Committee on Industrial Policy.
Subimal Dutt Committee on Industrial
Abid Hussain Committee on Small
C Rangarajan Committee on
Memorandum of Understandings (MoU)
Small Scale Industry
● A new thrust to Small Scale Industry,
given in Industrial Policy of 1977.
● MSMED Act, was enacted in 2006.
● Contributes 8% to GDP, 45% to all
manufactures and 42% to exports.
● According to the 4th census (2009) of
SSIs, 67% of the MSME are in
manufacturing and 33% are in services
Classification of MSMEs
Category Annual turnover
Micro Not exceeding ` 5 crores
Small Between ` 5 crores to
` 75 crores
Medium ` 75 to ` 250 crores
Major Industries in India
Iron and Steel
● First Steel Industry at Kulti, West
Bengal—Bengal Iron Works Company
was established in 1874.
● First large scale steel plant—TISCO at
Jamshedpur (1907) was followed by
IISCO at Burnpur (1919), West Bengal.
● The first public owned steel plant was
Rourkela integrated steel plant.
Presently, India is the 3rd largest
producer of steel and comes 1st in the
production of sponge iron.
● India ranks no 1 in jute production and no
2 in raw jute exports after Bangladesh.
● More than two third jute industry is
concentrated in West Bengal.
Cotton and Textile Industry
● Largest organised and broad-based
industry accounting for 4% of GDP, 20%
of manufacture value added and one third
of total exports earning.
● First cement producing unit was set-up at
West Bengal, Porbandar (Gujarat) in
● India is the second largest producer of
cement in the world.
● India is the second largest producer of
sugar in the world with a 22% share. It is
the second largest agro-based industry in