The Indian economy is currently a less developed economy.

All the features of an under- developed economy were still present in India right at the time of freedom and have not changed much till today.

(i) Poor Per Capita (Per Head) Income:

On the basis of per capital income, India is considered as one of the poor countries in the world. The poverty and backwardness India had inherited from the British rule. In order to give ‘Big Push’ to the standstill still economy, the government adopted the technique of ‘democratic’ planning’. However, India still remains one of the most underdeveloped countries in respect of per capita income. According to World Development Report 2005, India was one of the forty-six low income countries in 2003.

In the group of low income economies eight countries had higher per capita GNP (Gross National Product) than India. In 2003 India’s Purchasing Power Parity (PPP) estimate of GNP per capita was as low as $2,880. It was 1/13th GNP per capita as compared to USA, or 1/10th GNP per capita as compared to any developed economy.


According to the Planning Commission, the average daily calorie intake per head is 2400 for rural area, 2100 for urban area and 2250 for overall India. If a person fails to consume this calorie, he is considered as below poverty line. Thus, according to recent statistics one out of three Indians is a poor person.

(ii) Inequality of Income and High Poverty:

In India, distribution of income and wealth is unequal. Private ownership leads to concentration of wealth in few hands. Income inequalities result from concentration of capital and wealth. According to World Development Report 2000/2001, the bottom 40% of households in India only spent 19.7 % of total household-expenditure, whereas top 20% of households shared 46% of the same.

The] middle 40% only shared 34.3% of the household expenditure. The Gini Lorenz Ratio (an index of measuring inequality of income) was 0.378 in 1997 as against 0.297 in 1994. The problem of mass poverty is the sure outcome of income inequalities. According to the Planning Commission, the overall percentage below poverty line was 36 in 1993- 94, while 37.3 and 32.4 in rural and urban areas respectively. The latest estimates said that the percentage of population below poverty line is still very high.

(iii) High Dependence on Agriculture:

In India, occupational distribution is not at all up to the mark and clearly shows the economic backwardness. In 1951 about 69.7% of the total working population was engaged in primary (agricultural) sector. The figure had little improved in 1991, which was about 64.9% of total working population employed in agriculture occupation.


India is an Argo-based economy. In 2001, contribution of agriculture to the Gross Domestic Product (GNP) was 24%. This again came down to 237o recently. Table 1 is based on GDP by industry origin in 2001 for selected countries of developed and underdeveloped economies.

Gross Domestic Product by Industry of Origin

(iv) Rapid Population Growth:

India is an overpopulated country. Population in India has been growing at a fast rate. According to 2001 census, the population of India is 1,025 million as against 439 million in 1961. Recently, India’s population growth rate had increased about 2.14% per year. India at present is passing through second stage of demographic transition, which is supported by decline in birth rate and falling death rate. This leads to population explosion in India. This has also resulted in high dependency ratio,

(v) Low Level of Human Development:

According to United Nations Development Programme (UNDP), human development can be measured in terms of Human Development Index (HDD. HDI is a composition of three basic indicators like,


(a) Life Expectancy at Birth;

(b) Educational Attainment (Adult Literacy Rate and Gross Enrolment Ratio); and

(c) Real per Capita GDP.

The maximum and minimum values of HDI lie between zero and one. According to Human Development Report, 2004, we can Prepare Table 2.

HDI Value and Ranking of Selected Countries

From Table 2, it is clear that India with a HDI value of 0.595 ranks a lowly 127 in terms of HDI.

(vi) Unemployment:

The most important feature of Indian economy is widespread unemployment. According to NSSO (National Sample Survey Organization) surveys, India’s unemployment can be estimated in three concepts: the usual status, the weekly status and the daily status. The usual status shows only open unemployment.

According to 55th Round of the NSSO 1999- 2000, the current daily status of unemployment rates for urban and rural workers were 7.70% and 7.20% respectively. According to the Planning Commission, 2001-02, the total daily status unemployment was 3.49 crores. In India the chronic unemployment results in the structural disorder in the economy. Urban unemployment in India is mainly of three types: educational, structural and frictional, whereas rural unemployment is of two types: disguised and seasonal.

(vii) Shortage of Capital:

Capital formation plays a vital role for the economic development of a country. Accumulation of capital helps a country to overcome economic backwardness. In 1950- 51, the gross saving-investment rate of India was about 8.9%. In 2001-02, the rates of gross domestic saving and gross domestic capital formation were estimated to be 24.0% and 23.7% respectively. However, these rates are not adequate, hence, the economic growth rate is not up to the mark, compared to other developed nations, the capital formation in India is still far behind.

(viii) Primitive Technology:


In India, technologies used for different types of production are very much primitive and backward in nature. Although India is an agro- based economy but still large portion of the cultivable land are without irrigation facilities. Primitive and outdated techniques are still used by the farmers for cultivating crops and vegetables.

In large-scale industries modern techniques are used for producing different capital and consumer goods. However, in small-scale and tiny scale industries still primitive methods of production are going on. In terms of using modern and sophisticated techniques of production, India is far behind the developed countries.

(ix) Low Entrepreneurship Capabilities:

India is suffering with the problem low entrepreneurship capabilities. Lack of efficient and risk-taking entrepreneurs is one of the important reason behind the slow rate of economic growth in India. In India the number of capable private entrepreneurs are too less compared in to developed countries like USA. UK, France etc. Most of Indian industrialists are concentrating on short-term profits rather than long-run development. Except IT- sector, the number of efficient industrialists are much in all the other sectors of production. According to Joseph A. Schumpeter India is lagging far behind in innovating entrepreneurs.