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

 

IGNOU ASSIGNMENT 

Course Code : MCO – 04 

Course Title : Business Environment 

Assignment Code : MCO - 04 /TMA/2022-23 

Coverage : All Blocks 

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

Answer

The Indian economy has been historically regarded as an underdeveloped economy due to a range of factors. These factors include a large population, a high degree of poverty, income inequality, and an inadequate infrastructure. In this answer, we will discuss these factors in detail.

Some of the basic characteristics of India's underdeveloped economy are:

1. Low per capita income: India has a relatively low per capita income compared to more developed countries. This means that the average person in India earns significantly less than the average person in countries like the United States, Japan, or Germany.
2. High poverty rates: India has high levels of poverty, with a significant proportion of its population living below the poverty line. Many people in India struggle to meet their basic needs, such as food, shelter, and healthcare.
3. Limited infrastructure: India has limited infrastructure in terms of transportation, telecommunications, and energy. This makes it more difficult for businesses to operate efficiently and for people to access services.
4. Dependence on agriculture: India's economy is still heavily dependent on agriculture, with a large percentage of the population working in this sector. This can lead to issues such as low productivity, low incomes, and limited opportunities for diversification.
5. Limited access to education: Many people in India have limited access to education, which can limit their opportunities for economic advancement. This is particularly true for women and marginalized communities.

In conclusion, India's underdeveloped economy is a result of various factors, including its large population, poverty and income inequality, inadequate infrastructure, and dependence on agriculture. Although the country has made some progress in recent years, there is still a long way to go to achieve full economic development. The Indian government must take necessary steps to address these issues and create an environment that is conducive to economic growth and development.

Basic characteristics of the Indian economy:

1. Mixed economy: The Indian economy is a mixed economy, which means it combines elements of both capitalism and socialism. While the private sector plays a significant role in the economy, the government also plays an active role in areas such as education, healthcare, and infrastructure development.
2. Agriculture-based economy: Despite recent growth in other sectors, agriculture still plays a crucial role in the Indian economy. The majority of the population is engaged in agriculture, and the sector contributes significantly to the country's GDP.
3. Labor-intensive: The Indian economy is characterized by a large and growing workforce, with a high proportion of labor-intensive industries such as textiles, handicrafts, and small-scale manufacturing.
4. Service sector growth: While agriculture and manufacturing continue to play important roles, the service sector has emerged as a significant contributor to the Indian economy. Industries such as IT, business process outsourcing (BPO), and finance have experienced significant growth in recent years.
5. Demographic dividend: India has a young population, with a large proportion of the population under the age of 30. This has the potential to provide a demographic dividend, as the working-age population can contribute to economic growth and development.
6. Infrastructure challenges: Despite recent improvements, India still faces significant infrastructure challenges, particularly in areas such as transportation, energy, and telecommunications.
7. Informal economy: A significant portion of the Indian economy operates in the informal sector, with workers engaged in activities such as street vending, construction, and domestic work. These workers often lack formal protections and can face economic insecurity.

These are some of the basic characteristics of the Indian economy. However, it's important to note that the Indian economy is diverse and complex, with significant regional variations and ongoing changes as the country continues to develop.

Underdeveloped economies, also known as developing economies, share some common characteristics, including:

1. Low levels of economic development: Underdeveloped economies are characterized by low levels of economic development, often measured by metrics such as per capita income, GDP, and human development indicators such as education and healthcare.
2. Dependence on primary sector: Many underdeveloped economies are heavily reliant on primary sector activities, such as agriculture, mining, and forestry. This can limit economic diversification and increase vulnerability to external shocks such as fluctuations in commodity prices.
3. Limited infrastructure: Underdeveloped economies often have limited infrastructure, including poor transportation networks, limited access to electricity, and poor water and sanitation systems. This can limit economic growth and development and hinder access to basic services.
4. High levels of poverty: Underdeveloped economies often have high levels of poverty, with a significant proportion of the population living below the poverty line. This can result in limited access to basic services such as healthcare, education, and housing.
5. Limited access to credit and finance: Underdeveloped economies often have underdeveloped financial systems, with limited access to credit and finance. This can limit investment and entrepreneurship, further exacerbating poverty and underdevelopment.
6. Low levels of human capital: Many underdeveloped economies have limited investments in human capital, including education and healthcare. This can limit opportunities for economic growth and development and lead to low levels of productivity.

These are some of the basic characteristics of underdeveloped economies. It's important to note that underdeveloped economies are not homogenous, and there can be significant variations across regions and countries.