Why is Indian economy regarded an underdeveloped economy?State its basic characteristics

Q: Why is Indian economy regarded an underdeveloped economy? State its basic characteristics

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The Indian economy is often regarded as an underdeveloped economy due to various structural and developmental challenges. While India has made significant strides in areas like technology, infrastructure, and industrialization, a substantial portion of the country still faces economic underdevelopment, particularly in terms of income distribution, education, healthcare, and industrial growth. The following are some basic characteristics that highlight the underdeveloped nature of the Indian economy:

1. Low Per Capita Income

• Despite being one of the largest economies in the world by GDP, India’s per capita income remains relatively low. This indicates that a large portion of the population has a modest standard of living, with limited access to resources and economic opportunities. Many citizens struggle to meet basic needs such as food, housing, and healthcare.

2. High Dependence on Agriculture

• A significant percentage of India’s labor force is employed in agriculture, despite the sector contributing only a small share to the overall GDP. Agriculture in India remains largely dependent on monsoons, traditional farming methods, and small landholdings, which results in low productivity. The underdevelopment of agricultural infrastructure and the prevalence of subsistence farming reflect the economic struggles of rural India.

3. High Population Growth Rate

• India has a large and rapidly growing population, which puts immense pressure on its resources, infrastructure, and job market. High population growth often outstrips the country’s ability to provide sufficient employment, healthcare, education, and social services. The inability to effectively control population growth exacerbates the problem of poverty and unemployment, contributing to economic underdevelopment.

4. Poverty and Inequality

• India continues to struggle with significant levels of poverty and income inequality. Although economic reforms have helped reduce poverty over the past few decades, a large percentage of the population still lives below the poverty line. Wealth is concentrated in the hands of a small portion of the population, creating stark disparities between different socioeconomic groups. Regional disparities between urban and rural areas also highlight inequality in income and access to services.

5. Underdeveloped Industrial Sector

• The industrial sector in India is still developing. Although there are certain advanced industries such as information technology, pharmaceuticals, and automobile manufacturing, the overall industrial base remains weak compared to more developed nations. The presence of a large informal sector, lack of innovation, and low capital formation in industries hinder India’s progress in becoming a fully industrialized economy.

6. Unemployment and Underemployment

• Unemployment and underemployment are persistent problems in India. Even though the economy generates a large number of jobs annually, they are often low-paying or informal, without benefits or job security. Many people are employed in low-skill, low-wage jobs, while highly skilled individuals often migrate abroad due to a lack of opportunities in India.

7. Low Level of Human Development

• India ranks relatively low on the Human Development Index (HDI), which measures indicators such as life expectancy, education, and standard of living. Poor healthcare, low literacy rates, inadequate educational infrastructure, and malnutrition are significant challenges that reflect India’s struggle with human development. These issues hinder economic growth and perpetuate cycles of poverty.

8. Inadequate Infrastructure

• The country faces significant gaps in infrastructure, including roads, electricity, water supply, and sanitation. Rural areas, in particular, suffer from poor infrastructure, which limits economic activity and reduces access to essential services like healthcare and education. Urban areas also struggle with overcrowded and inadequate infrastructure due to rapid urbanization.

9. Low Rate of Capital Formation

• Capital formation, which refers to the accumulation of capital goods like buildings, machinery, and tools, is relatively low in India. This is partly due to low savings rates, which limit investment in productive sectors. The lack of sufficient capital formation hampers industrial growth and limits the potential for technological innovation and modernization.

10. Low Levels of Technology and Productivity

• While India has made progress in technology, particularly in IT and digital services, productivity levels across various sectors, especially agriculture and manufacturing, remain low. The country faces challenges in adopting modern technology, particularly in rural areas, which hampers overall economic growth.

Conclusion

India’s classification as an underdeveloped economy stems from its structural issues like poverty, income inequality, unemployment, and underdeveloped industrial and agricultural sectors. Addressing these challenges requires comprehensive reforms in areas such as education, healthcare, infrastructure, and governance to foster inclusive and sustainable growth.