Economics Ch-1 Long Questions PDF

# Status of Indian Economy ## Long Questions - ### Explain the basic characteristics of contemporary Indian economy? India is a vast country in terms of area and population. It occupies 2.4% of the total land area of the world and supports 17.5% of the total global population on its present stage...

# Status of Indian Economy ## Long Questions - ### Explain the basic characteristics of contemporary Indian economy? India is a vast country in terms of area and population. It occupies 2.4% of the total land area of the world and supports 17.5% of the total global population on its present stage of development. The Indian economy exhibits the characteristics of backwardness and progress. Thus, the Indian economy is regarded as a developing economy. The following features of the Indian economy indicate the state of its underdevelopment: 1. **Low per capita income:** India is regarded as underdeveloped because per capita income is very low. It is estimated that its per capita income in 2013 was $1499, which is much lower than that of the developed countries like USA, Canada, Germany, etc. Low per capita income gets reflected in the low standard of living and acute poverty. 2. **Extreme inequality in the distribution of income:** Income distribution in our country is highly unequal after liberation to human development. According to the planning commission report - 2011 prepared by the planning commission, only 5% of the rich households owns 38% of the total assets, whereas 60% of the poorer households owns only 13% of the total assets. Because of this, the per capita income of people in the bottom group is extremely low. 3. **Heavy population pressure:** India’s population is not only very large, but also is becoming larger day by day due to a high growth rate. It is a great impediment in the path of development. It leads to unemployment and underemployment. 4. **Predominance of agriculture:** The Indian economy is primarily an agrarian economy. Though agriculture constitutes the most dominant sector of the Indian economy, its productivity (both land and labour) is quite low as compared to that of developed countries. 5. **Under-utilisation of natural resources:** India is rich in natural resources such as mineral resources, forest resources, water resources, etc. but due to lack of adequate capital, advanced technology and enterprise, these resources are either under-utilised or mis-utilised. 6. **Poor quality of human capital:** India is under equipped with both human capital and physical capital such as machines, tools, etc. are inadequate in relation to the vast labour force and huge natural resources. In respect to human capital such as knowledge, skill and efficiency of people, India’s position is average due to low levels of education and inadequate health care. ## Progressive Features - Now it is claimed that India is strengthening because of rapid rise in GDP, increase in productivity capacity development of infrastructure boost in exports, structural change, etc. ## Rising Trend in GDP and per capita income – Gross domestic product is showing a rising trend. Until 1980, growth of GDP was not encouraging. But since 1980, GDP has been increasing. This has become possible due to growth of output in agriculture, industry and service sector. ## Increase in Capital Formation – There has been substantial rise in physical capital formation in the country. This includes factory buildings, machines, power plants, etc. There has also been some rise in human capital formation, research, health care etc ## Industrialization - This is indicated by a variety of structural and institutional changes. The share of primary sector has declined and that of secondary and tertiary sector has gone up. In industrial production, the relative share to the traditional goods like food and textile had declined and that of new industries like chemical & electronic equipment has substantially increased. ## Self-Reliance - After adoption of the policy of liberalization and globalization, exports have gone up. Industrial production and the share of the traditional sources of foreign aid declined. By the end of the fifth five year plan, India became self- sufficient in food grain production. ## Dualistic Economy – There is coexistence of modern industrial sector with backward and primitive rural sector i.e. dominated by traditional agriculture. Industrial sector is developed which uses modern technologies and production. All these achievements reveal that the Indian economy despite being underdeveloped in several respects is doing well and heading in the path of rapid economic development. The economy is in a transition - transition from underdevelopment to development from poverty to prosperity, from scarcity to abundance. In other words, the Indian economy is no more backward and underdeveloped, but it may be termed as a developing economy. # Long Questions - ## Explain the demographic features of the Indian economy? Demographic features refer to the characteristics of population like size, composition, diversity, growth and quality of population. These aspects of Indian population are discussed below: 1. **Large Size & Fast Growth:** India is the second most populous country in the world whilst China is first. According to 2011 census, India's population is 1,240.2 crore, whereas China's population stands at 135 crore. Every sixth person on the planet is an Indian. 2. **Second stage of demographic transition:** The population growth of a country passes through three different stages as development proceeds. In the first stage, there is high birth rate and high death rate. India, till 1921, was in the first stage of demographic transition. In the second stage, there is high birth rate and low death rate. It leads to rapid growth of the population. After 1921, India entered the second stage. In the third stage, there is low birth rate and low death rate. India is now passing through the second stage of demographic transition. 3. **Rapidly Rising Density:** Density of population refers to the number of persons living per square kilometer of land area. It is calculated by dividing the total population of the country by land area. It indicates the man-land ratio in a country and the magnitude of burden that a unit of land has to carry. In 2001, it was 117 per sq km which increased to 382 in 2011  4. **Bottom-heavy age structure:** The proportion of children below 15 years is relatively high. According to 2011 census, it is 35.6%. High birth rate is mainly responsible for a large number of dependent children per adult. 5. **Predominance of Rural Population:** In 1951, the rural population was 82.7% and urban population was 17.3%. In 2001, rural population was 72.6% and urban was 27.4%. In 2011, rural population was 68.84% and urban was 31.16%. This shows slow progress of urbanization in India. 6. **Sex Composition:** Sex composition is an important social indicator and shows the number of females per 1000 males. In 1901, there were 972 females per 1000 males. It declined to 927 in 1991, 933 in 2001 and 940 in 2011. It shows a rising tendency towards masculinity. 7. **Low Quality of population:** The quality of a population can be judged on the basis of life expectancy, the level of literacy and the level of technical training attained by the people. On the basis of these parameters, the quality of population in India is low. In 2001, the literacy rate was 65.38% and in 2011, it was 74.04%. Life expectancy was 63.9% in 2001 and 68.4% in 2011. 8. **Low Work Participation Rate:** The ratio of working population to the total population is referred to as work participation rate. In India, labour force is defined as that portion of the population which belongs to the age group of 15-59. In our country, work participation rate is very low. 9. **Occupational Structures:** The distribution of working population of the country in different occupations (sectors). The primary sector is composed of agriculture, livestock, forestry, fisheries, etc. Secondary sector is composed of mining, manufacturing and construction. The tertiary sector includes trade and commerce, transport, communication, banking, insurance, etc. In India, more than 50% of the total working population is engaged in the primary sector.  10. **Symptoms of over population:** The concept of overpopulation is a quantitative one. The ideal size of population in a country refers to a quantity beyond which increase in population is not desirable. No doubt, food production has increased, but problems like poverty, hunger and malnutrition are still around. ## Demographic dividend – Demographic dividend refers to a particular stage of demographic transition. When the proportion of population in the productive age group in total population is high, leading to higher economic development. These are the demographic features of the Indian economy. ## Demographic Features: Adverse Effect of Population ### Explain the adverse effects of rapid growth of population in India Human beings are both means and ends of economic development, when in right numbers they are an asset, but if the number is beyond the capacity, population becomes a liability. Rapid growth of population has stood as a great obstacle in the path of rapid economic development of India. 1. **Impact on per capita income:** The per capita income is an important indicator of economic growth and standard of living. Though national income has increased significantly in India, the per capita income has not gone up proportionately, due to rapid growth of population. 2. **Burden of unproductive population:** Indian population is characterized by a large number of dependent children per adult. Besides, there are also persons above the age group of 15-59 who do not seek employment. High dependency load of these unproductive population is a matter of concern, which adversely affects our effective savings and capital formation. 3. **Impact on food supply:** Due to rapid growth of population demand for food grains has increased. Though we have achieved self- sufficiency in food grains, per capita availability has not increased. The increase in food grain has been almost neutralized by rapid growth of population. 4. **Problem of capital formation:** Capital formation is an indicator of economic development. It depends on the rate of saving and investment. But due to rapid growth of population, major portion of national income is spent on consumption. So there is a lower rate of capital formation in India. 5. **Problem of unemployment:** Large size of population results in shortage of capital resources. But due to large army of labourers, it becomes difficult to provide employment opportunities to the entire working population. 6. **Pressure on land:** Due to the rapid growth of population, per capita cultivated area is gradually declining. Problems of subdivision and fragmentation of holdings are increasing. It adversely affects economic development. It also puts pressure on the environment. 7. **Pressure on environment:** High birth rate brings more people but also more pollution and damage to the atmosphere. More land waste, and damage to the biosphere. Average temperature of the world’s surface has risen by 0.75°C, bringing greater risks to the environment. 8. **Burden of education, medical care and housing:** High birth rate reduces health and welfare of the common mass. It creates the burden of education, medical care and housing. 9. **Social problems:** Unemployment and poverty lead to frustration and anger among the educated youth. This leads to robbery, beggary and murder. Overcrowding, traffic congestion of cities are the direct result of overpopulation.