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Indian Economy

Notes April-December 2012. The Current Account Deficit (CAD) at 4.6 per cent of GDP in the first half
of 2012–13 is a cause for concern. The widening of the trade and current account deficits has been
accompanied by a decline in the value of the Rupee since August 2011.
It is important for you to note that after attaining an all-time low of ` 57.22 per US$ on June 27,
2012 the Rupee rebounded and was in the range of 53–55 per US$ in the month of January 2013.
WPI inflation, after remaining persistently high during 2010–11 and 2011–12, has shown signs of
moderation since December 2011. However, it has remained sticky at around 7 to 8 per cent over
the last 12 months. With widespread reform measures initiated in recent months and the global
economy poised for a moderate recovery in 2013–14, the Indian economy is expected to witness
an improved outlook in 2013–14.

1.1 Basic Characteristics of Indian Economy

In this section, you will learn about the basic characteristics of Indian economy. It is an under
developed economy in which Agriculture is the back bone of Indian economic. 60% of India’s
population are on the below poverty line. Mineral resources are not fully utilised. We are
selling iron ore by trucks and getting blades by packets. Majority of the people of India are
leading a poverty line. Indian economic is affected by it. Countries which are on the part of
progress and which have their potential for development are called developing economic. So
India is termed as developing economy by modern views.

You need to remember that the important features of Indian Economy are as follows:
1. Low Per Capita Income: Under developed economy is characterised by low per capital
income. India per capital income is very low as compared to the advanced countries. For
example, the capital income of India was 460 dollar, in 2000. Whereas their capita income
of U.S.A in 2000 was 83 times than India. This trend of difference of per capita income
between under developed and advanced countries is gradually increasing in present times.
India not only the per capita income is low but also the income is unequally distributed.
This mal-distribution of income and wealth makes the problem of poverty in ore critical
and acute and stands an obstacle in the process of economic progress.
2. Heavy Population Pressure: You must note that the Indian economy is facing the problem
population explosion. It is clearly evident from the total population of India which was
102.67 cores in 2001 census. It is the second highest populated country China being the
first. India’s population has reached 110 cores. All the under developed countries are
characterised by high birth rate which stimulates the growth of population; the fast rate of
growth of population necessitates a higher rate of economic growth to maintain the same
standard of living. The failure to sustain the living standard makes the poor and under
developed countries poor and under developed.
3. Pre-dominance of Agriculture: It is important for you to note that the occupational
distribution of population in India clearly reflects the backwardness of the economy. One
of the basis characteristics of an under developed economy is that agriculture contributes
a very large portion in the national income and a very high proportion of working
population is engaged in agriculture.

4. Unemployment: There is larger unemployed and under employment is another important
feature of Indian economy. In under developed countries, labour is an abundant factor. It
is not possible to provide gainful employment the entire population. Lack of job
opportunities disguised unemployed is created in the agriculture fields. There deficiency
of capital formation.
5. Low Rate of Capital Formation: In backward economics like India, the rate of capital
formation is also low. Capital formation mainly depends on the ability and willingness of

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