INDIAN ECONOMY Special Articles

INDIAN ECONOMY 

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

current prices.

Features

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

chronic unemployment.

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

India

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

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.

Historical Milestones

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.

Inclusive Development

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,

1990.

● Three dimensions

1. Life expectancy at birth;

2. Education Index comprising means

year of schooling and expected year

of schooling;

3. GNI per capita (PPP US $) Index.

● India has been ranked 129 out 189

countries on 2019’s HDI.

Programmes/Measures

● 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

launched.

● Rural development programmes like

MGNREGA and Bharat Nirman.

POVERTY

● The erstwhile Planning Commission

estimated poverty rate based on data

collected by National Sample Survey

Organisation (NSSO).

● 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

Renewal Mission

2005

Prime Minister Employment

Generation Programme

2008

Mahatma Gandhi National Rural

Employment Programme

2009

National Rural Livelihood Mission

(NRLM)

2011

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)

2015

Smart City Mission 2015

AMRUT (Atal Mission for Rejuvenation

and Urban Transformation)

2015

Pradhanmantri Jeevan Jyoti Beema

Yojana

2015

Pradhanmantri Suraksha Beema

Yojana

2015

Pradhan Mantri Krishi Sinchayee

Yojana

2015

Start-up and Stand-up Yojana 2016

Pradhan Mantri Fasal Bima Yojana 2016

Ujala Yojana 2016

UNEMPLOYMENT

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

to work.

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.

and

Programme/Measure Year

Mid-Day Meal Scheme 1995

Swadhar 1995

Swayam Sidha 2001

SSA 2001

Support to Training and Employ-

ment Programme for Women (STEP)

2003-04

Ujjwala 2007

Dhanlaxmi 2008

Integrated Child Protection Scheme 2009-10

Sabla Scheme 2010

Programme/Measure Year

National Mission for Empowerment

of Women

2010

Bal Bandu Scheme 2011

Nai Roshni 2012

Beti Bachao Beti Padhao 2015

PM Ujjwala Yojna 2016

PM Matra Vandana Yojna 2017

AGRICULTURE

● 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.

Revolution Production

Blue Fish Production

Golden Fibre Jute

Pink Onion

Red Meat

White Milk

Yellow Oilseed

Tricolour Revolutions

Tricolour revolution has 3 components

● Saffron revolution–Solar energy

● White revolution–Cattle welfare

● Blue revolution–fisherman’s welfare

INDUSTRIES

Industrial Policies

● 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

(PSEs)

● 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

chemicals.

● 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

Miniratnas

● 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

Grid Corporation.

● 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

net worth.

● At present there are 61 in category I and 12

in Category II.

Industrial Committes

Hazari Committee on Industrial Policy.

Subimal Dutt Committee on Industrial

licensing.

Abid Hussain Committee on Small

Scale Industry.

C Rangarajan Committee on

disinvestment.

Memorandum of Understandings (MoU)

Arjun Sengupta.

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

sector.

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.

Jute Industry

● 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.

Cement Industry

● First cement producing unit was set-up at

West Bengal, Porbandar (Gujarat) in

1914.

● India is the second largest producer of

cement in the world.

Sugar Industry

● India is the second largest producer of

sugar in the world with a 22% share. It is

the second largest agro-based industry in

the country.