L-3 Economic Development and Indian Economy

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3

E O N O N U E V E L O P M E N T ~ ~INDI NE ONOMY

3.1 IN RO UcnON

You have learnt in th previous lesson that everyeconomy tries to produce more and m

goods and services for itspeople. In this lesson you will study about th meaning ofecono

development and characteristics of economies. You will also study the main characteri

of th Indian economy.

3 OBJECTIVES

After going throu h this lesson you will be able to :

3 3

••

•

••

define economic growth;

differentiate between economic growth and economic development;

identifY th developed and developing economies;

state some common characteristics the developed and developing economi

list die main characteristics of Indian economy.

MEANING OF ECONOMIC GROWTH

An increase in the total volume of goods and services produced by a nation is tenne

economic growth. However, such an increase must not be one time butmust continue

a long time. Any increase in thevolume ofgoods and services due to some sudden occurr

i.e. one time increase cannot betermed as economic growth. For example, ifagricul

production increases only in one year but does not increase in subsequent years, it wil

be termed as economic growth. We talk of economic growth as an increase in

volume of goods and services produced by a nation spread over a long period of tim









3Q::Economics

You will observe that among the countries included in the table 3.2 Bangladesh ha

lowest pe r capita GN P ( 220) and Japan has the highest pe r capita GNP ( 34,

There are countries having even lower pe r capita GNPthan Bangladesh. On the ba

pe r capita GNP India's rank is 23 from the bottom among 133 countries o f the w

In comparison to Japan, India's pe r capita GN P is less th n II I00. In other words oaverage a Japanese gets 100 timesmore income thanan Indian. Obvioosly, it indicate

the standard of living of the people in Japan is very much higherthan the standa

living in India. If we compare India's pe r capita GN P with its neighbouringcountrie

Pakistan, Sri Lankaand China we find that th e per capita GN P is higher in these coun

The difference in pe r c pit GNP shows the contrast in the standard ofliving of'the pof different countries. - .

Characteristics o f developing countries

As stated earlier although no tw o countries among the developed countries or

among the developing countries will have similar characteristics, it is still possib

broadly identifY some o fthe most common characteristics o fdeveloping and deve

countries. Some economists call the developing countries as underdeveloped coun

Since all these countries have started the process of development and are develo

t he y a re grouped as developing countries.

The common characteristics o f developing economies are:

i) Most people o f these countries have a very low level of income a n dconsump

ii A large number o fpeople are below the poverty line meaning thereby th t theyar

able to meet even their basic requirement of food, clothing and shelter.

iii A large number of people in.these countries do no t find employment fo r a large p

th e year.iv) The quality offife of the people in these countries is poor. he quality of'life depen

literacy level, medical facilities, hygenic and sanitation facilities, infant mortalit

an d life expectancy etc.

v) Agriculture in these countries is the main occupation of the people. Th e industr

technology is backward.

vi Th e rate ofgrowth of population inthese countries ishighand they are overpopu

Characterstics of developed countries

The common characteristics ofdeveloped countries ar e

i) In these countries the level o f income nd consumpt;ion is high. In other word

people of these countries enjoy a high standard of living.

ii Th e quality of life of the people in these countries is better. The literacy rate is

high. They enjoy much better medical facilities. ir expectancy is veryhigh.mortality rate is very low. .

iii These countries are generally advanced in industry and technology.



- - ------ - ---- --Economic Development and Indian Economy;;3

Most peoplein these countries are able tomeet their basic needs of food clothing and

'shelter;

In most ofthese countries the rate ofgrowth

population is low because the birth rateand death rate both are low,

IIflife ndicators

following table 3.3 shows the difference in quality of life in some of the developing

d developed countries : . ,

Table 3.3

Quality of Life. Indicators

I fe AdUltIilf iiiii

irth QiiiDliliiaieathexpectancy illiteracy mortality rate rate agriculture

atbirth rate rate, (1993) 1993 to GNP

(1994) (1995),

62 48 70 29 10 30

57 62 81 35 30 601 . 62 .40 Q9 2572 10 16 20 06 24

49 65 120 48 18 . 57

69 19 30 19 08 21

6806

42 30 08 28

onesia 63 16 53 24 08 17

71 Less than 5 12 16 06 07h Africa 64 18 50 31 09 05

79 Less than 5 04 10 08/ 02

A 77 08 16 09

76 06 13 02

78 06 13 10 02

rmany 76 06 IO 01

above table 3.3 shows the wide disparities between the developing countries as well

developed countries in the quality oflife. This table when read with table 3.2 indicates

almost all those countries which have very low per capita G:NP (i.e. the developing

untries) do not have good qua1ityoflife. For example, life expectancy at birth inIndia

62, in Pakistan-60, B a n g l a d e s h 5 7 C ~ 6 9 ; while the life expectaocy in Japan,

A., France, Germany (developed countries) ismore than75 years. Japanhas the highest

expectaocy in the'world (79 years). Similarly, youwill observe that the adult illiteracy

e in all the developed eountries is less than 5% whereas this rate is verymuch higher in

veloping countries. In respect ofbirth rate, e th rate, infunt mortality rate, we find the

e trends. You will also observe that in the developed countries the contribution of

to their Gross National Product is just 2 to 5 whereas in the developing



32::Economics

countries it is much higher (30 in case-of India). It·shQWS that the developed count

are highly industrialised countries.

Amoog the developing countries some are developing faster than the others. ach on

these oountries have reached a certain stage of development bu t are _still fur from be

categorised as developed countries. For example, RepublicofKorea and India were alm

at the same stage of development in 1950 s. Butthat country developed much faster tIndia and is now categorised as a developed country,

POINTSTOR M M R

• Economies of the world are divided into developed and underdeveloped

economies on the basis of per capita real national income.

• COI \tries with per capita GNP of 2896 or more areclassified as developed

and less than 2896 are classified as developing countries.• The main characteristies of developed economies are : i) High level of

income and consumption, ii) Quality of life in these countries is much better,

iii) hey have advanced technology and industry, - iv) The basicneedsof the people aremet, v) The rate of growth 6f population in most of these

countries is low.

• The main characteristics of developing economics are : i) Level of income

and consumption is low, ii) The quality of life is poor, iii) There Is

unemploymentandpoverty, iv)Agriculture is the mainoccupation, v) Rateof

growth of population is high.

• The quality of life is determined by life expectancy, adult illiteracy rate, infan

mortality rate etc.

iN f X tQU ST ONS 3 2

TIck , / the correct answer :

i) The countries of the world are classified intodeveloped and developing countries

the basis of.;

a) per capita real income

b) Iifi.expectancyc) literacy rate

d) level of unemployment.

ii) Developed countries have :

a) very high birth rate and high death rate

b) very high birth rate and very low death rate

c) very low birth rate andvery high death rated) very low birth. rate and low death rate.



Economic Development and Indian Economy::3

developing countries :Most of the people are eng ged in tertiary (service) sector.

Agriculture is the main occupation.Advanced technology is used in industries.

Level of adult literacy is very high.

6 INDIANECONOMY A DEVELOPING ECONOMY

dian economy bas all the characteristics of a developing economy Let us IIy to know in

me detail the various characteristics of Indian economy. The main characteristics of

Indian economy are as follows :

Low level of income :

percapitaNNP in Indiain 1995.96 was aboutRs 9,300. It isoneof the lowest in therld. Amongthe 133 countries ofworld India's rank is 1l0 It means that there are 109

ofthe world which have higherper capita income than India. Low level of income

icates low standard ofliving i.e. low level of consumption. Whatever progress bas been

de in terms of the increase in production since Independence, the same is not reflected

increase in per capita income because along with increase in production, the population

also increased rapidly. Furthermore, everybody in India does not get an income ofRs.

01- in a year is indicated by the average per capita income. There are widedisparities

income. This means that a large proportion of population have income level much

low the average. About one third of the population is living below the poverty line i.e.

are not able to afford even the minimum nutrition required. Due to the low level of

ing the efficiency of labour is also low.

.Predominance of agriculture :

two third of India's work force is engaged in agriculture. Thecontribution of

to national income is about 30 . As against this the contribution of agriculture

the national income in most of the developed countries is between 2 to 4 and the

rking force engaged in agriculture is between 2 to 9 . Rainfall continues to be the

source of irrigation. The technology used in agriculture is lsobackward. Although

some re smodern techniques ofcultivationare in application, still the vastagricultural

ea uses primitive techniques of cultivation. A vast area of agricultural land is still not

vered by irrigational facilities.

Capital • deficiency:

e low level of income results in low level of savings which results in low level of capital

For want of capital other resources like labour and natural resources remain

India bas a large potential for renewable as well as non-renewable resources.

are not-able to utilise them fully for w tt of capital.

Technological backwardness:

large parts ofalmost all sectors ofthe Indian economy, technology used inproduction



34::Economics

is backward. The expenditure incurred on research and development is also low. Advanc

technology is in use in only a few industries.

5. Inadequate infrastructural facilities:Inftastructural facilities include power, transport, communication etc. These facilities a

essential fur industrial development of the country. They also affect the development

agriculture nd services sector. AIl these facilities are inadequate.

6 High rate o growth of population :

India s population is very large (more than 84 crores in 1991) n is ising at a fast ra(about 2.1 ). Since 1951 when the development process was the birth rate hdeclined very slowly; while the death rate declined faster. A high owth rate of populati

puts additional. pressure on resources. n such a situation the rease in per cap

income will be much less th n the increase in total production na ional income). .

7. High rate of illiteracy : .Illiteracy rate is quite high. Although ithas declined substantially since 1951, it is still vehigh: lmost half o the Indian population illiterate. Illiteracy rate in females is mu

higher than in males.

8 High infant mortality rate : .

Thenumber of deaths of infants under.one year of age per thousand live birthsin Indis very high. It was 70 in 1995. This shows the inadequate medical facilities, low level

nutrition and poorsanitary conditions.

9 Tradition bound att itudes towards rk and nfe:

The Indian society is divided into many castes and sub-eastes.resulting in frictions in t

society. The religious ndsocial beliefs and customs inhibit the development of scienti

attitudes. For example, the child is considered a gift ofGod. Each family wishes to havemale child. There is universality ofmarriage i.e. adults prefer to lead imarried life.

10. Joint family system:

loint family system obstructs mobility of labour, Families prefer to live together eventhis may mean having a low level ofIiving.

These are some of the important characteristicsof the Indian economy, though this isnot

exhaustive list. However, the Indian economy has developed during the last fifty yea

Theper capita income has increased though not at a very fast rate. The infrastructu

development has also taken place. In fact there has been development in almostsectors. But the rate ofdevelopment is slowed down because of the high rate ofgrow

ofpopulation. India is categorised as a developing economy. The process of developm

had started long back with the advent of the five year plans and it is gaining momentum

(



Economic Development n Indian Economy::

NTS TO REMEMBER

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•

•

India is a developing country, It bas low levels of income n consumption.

Agriculture is the main occupation and it is backward.

India lacks infrastructural facilities due to lack ofcapital.

Rate ofgrowthofpopulation is high. The attitude ofthe people is not scientific.

The joint family system in India reduces mobility of labour.

QU ST ONS 3.3

in the blauks from the words given in brackets

Indian economy is a economy developed, developing)

Adult rate is very high in India literacy, illiteracy).

Joint family system obstructs mobility oflabour inftastructural

development).

) There is of capital in India scarcity, abundance)

H TYOUH V LEARNT

•

•

•

•

Increase in output of an economy continously and over a long period is called

economic.growth.

If in al l economy alongwith economic growth there are positive changes likeimprovement in the standard of living of the people, decline in the numberof

the poor, improvement in the efficient use ofresources, reduction in inequalities

of income, it is called economic development.

Economies of tile world are classified into two groups - de veloped and

underdeveloped - on the basis of per c ap it a real national income. .

India.is a developing country. Here per capita income is low. Standard of living is low.There is shortageofcapital n inftastrutural facilities. Attitude

towards life is traditional. There is over-population. Infant mortality rate and

illiteracy rate is high.

L EXERCISE

Differentiate between economic development and economic growth.

What is the World Bank criterion for classifying world economies into developed

and underdeveloped countries.

Explain the difference between characteristics ofIndian and developed economies.



36::Economics

ANSWERS

Intext Questinns 3.1

i) Economic growth ii) developed iii) developing iv) development. v) growth, development

Intext Questinns 3

i) a ii) d iii)D

Intext Questions 3.3

i) developing ii) illiteracy iii mobility oflabour iv scarcity

Terminal xercise

I Read section 3.4

2. Read section 3.5

3. Read section 3.6

L-3 Economic Development and Indian Economy

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