Notes of Economics Class 12: Overview of Indian Economy
Chapter 1: Overview of Indian Econmy
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1.1 Features of Indian Economy
(i) Low per capita income
(ii) Heavy population pressure
(iii) Dependence of population on agriculture
(iv) Poverty and Inequality income distribution
(v) Higher level of capital formation which is a positive feature
(vi) Planned economy
Notes of Economics Class 12: Overview of Indian Economy
1.2 Role of Agricultural in India
- Agriculture is one of the most important sectors of Indian economy, providing food and raw materials to industries.
- At the time of independence, over 70% of India’s population depended on agriculture for livelihood.
- The share of agriculture in national income was 56.6% in 1950–51, showing its dominance in the economy.
- With industrialization and growth of the service sector, both the population engaged in agriculture and its share in national income declined.
- In 1960, about 74% of the labour force was in agriculture, which fell to 51% in 2012.
- During the same period, the share of industry rose from 11% to 22.4%, and services from 15% to 26.5%.
- This shift of labour force from agriculture to other sectors is a common feature of economic development.
- Agriculture ensures food security — food grain production rose from 55 million tonnes (1950–51) to 259 million tonnes (2012–13).
- Due to this increase, India’s dependence on food imports has almost ended.
- Growth in cereals and cash crops largely contributed to this achievement.
- Agriculture also earns foreign exchange, contributing 12.3% of total exports (2011–12).
- Major export items include tea, sugar, tobacco, spices, cotton, rice, fruits, and vegetables.
Thus, agriculture remains the backbone of India’s economy despite rapid industrial and service sector growth.
Notes of Economics Class 12: Overview of Indian Economy
1.3 Growth of Industry in India
- Industry or the secondary sector of the economy is another important area of economic activity.
- After independence, the government of India emphasized the role of industrialization in the country’s economic development in the long run.
- The 1956 policy emphasized on establishment of heavy industries with public sector taking the lead in this area.
- Adoption of heavy or basic industries strategy was justified on the ground that it will reduce the burden on agriculture, enable growth in the production of consumer goods industries as well as small industries that are helpful for employment generation and achieving self reliance.
- After the adoption of the Industrial Policy Resolution (IPR) in 1956 there was tremendous growth in industrialization during the second and third plan periods i.e. 1956-61 and 1961-66.
- Public sector contributed maximum to this growth.
- But towards the end of 1960s, investment in industries was reduced which adversely affected its growth rate.
- In the 1980s, this trend was reversed and investment in industries was increased by making the infrastructure base such as power, coal, rail much stronger.
- In 1991 the government of Indian decided to encourage the role of private sector in industrial development, remove the rigid licence system which is known as liberalization and allow international players to compete in the domestic country as well as domestic players to explore foreign territories. The aim of taking all these steps was to strengthen the process of industrialization in the country. Such a model of industrial development is called Liberalization, Privatization and Globalization (LPG) model.
- However, in the beginning of the new millennium, between 2002-08 there was again some recovery due to increase in saving rate from 23.5 percent in 2001-2 to 37.4 percent in 2007-08
Notes of Economics Class 12: Overview of Indian Economy
