Nature of Indian Economy - Economics (B.A G.N.D.U)

Nature of Indian economy

The Indian economy is the sixth-largest economy in the world. Globalization, integration into the global economy, investment rates, a young population, and a low dependence ratio are all contributing factors. In the past as well, the Indian economy was one of the most stabilized and was the largest economy in the world.

For almost 2 millennia (from the 1st century to the 17th century) the Indian economy contributed 35%-40% of the world's economy. By 1750, the Mughal Empire had a strong industrial manufacturing sector, with India contributing around 25% of the world's industrial output, making it the most significant manufacturing hub in international commerce. Until the end of the 18th century, Mughal India accounted for almost 95% of the goods and textiles exported to Europe from Asia. At the same time, the imports were as low as negligible and were still sufficient for the country.

During the British period, the Indian economy was hit majorly, and it came down to 4.2% of the world economy in 1950 from 24.4% in 1700.


Nature of the Indian Economy


The Indian economy is a mixed economy, which means that a part of the economy is owned by private businessmen, industrialists, and entrepreneurs. The other part is managed by the government.

The Indian economy is highly dependent on the service sector because of its contribution to India's GDP, which is equal to 60% of

the total. It is followed by agriculture.


Since the Independence of India, the agriculture sector has constantly decreased, while the service sector has increased gradually. Also, the industrial sector had improved as well.


Salient Features of the Indian Economy


The Indian economy is still on the list of developing economies of the world, owing to extremely high levels of illiteracy, unemployment, poverty, and so on. Despite so many problems around the nation to be solved and encountered daily, the Indian economy has a low GDP, compounded by the following issues:


  • Poor Infrastructural Development

As per a recent report, India needs almost $100 million in infrastructure, to ensure the entire population benefits from electricity, gets safe drinking water, and proper sanitation services.

  • Imperfect Market

The Indian markets have a lot of easily exploitable loopholes. With an improper supply chain, the prices in the market vary significantly at different locations.


  • Low per Capita Income

The revenue of a country is highly dependent on the purchasing power of the population; the more they spend or purchase products, the more the increment in the revenues of the nation. However, to spend, the population must earn more and must be able to fulfill their basic needs. Only then can they manage to purchase other facilities and comfort. Therefore, per capita income is one of the key factors.

  • Poverty

It has been said, “A nation will be poor if it's poor", and this is an endless loop. Such loops of poverty always hinder the progress of a country and are a major issue for a country to be reckoned as a developed nation.


  • Unadvanced Technology

Most of the work done in India is labour-intensive work. Thus, there is a huge gap between the technology required in the industries and what is in use in the country.


  • Income Disparity

The concentration of wealth in the country is highly focused and is possessed by 1% of the population of the nation. This 1% of the population owns 53% of the wealth within the country. Therefore, poverty is one of the important points that the government needs to highly focus on.


  • Agro-based Economy


The Indian economy is highly dependent on the agriculture sector. This sector adds up to almost 14% of the total GDP of the country, and more than half of the population of the country is dependent on this sector.



  • Capital Formation

The average income of a person in India is very low and the GDP of the country is dependent on this. Therefore, there is a significant need for improvement in the rate of capital development.


  • Social issues

Indian society is referred to as a backward society. This is due to communalism, a highly male-dominated social structure, a regressive caste system, and other such malice.