Hello everyone, in the previous topic we were talking about The Companies Act and The Consumer Protection Act. Today we are going to talk about The Structure of the Indian Economy in which we learn about Economics, the role of the state in an economy, the sector of the economy, types of the economy, characteristics of the economy, and the contribution of some major industries in economic development.

The Structure of the Indian Economy

Economics is the study of how societies use scarce resources to produce valuable commodities and distribute them among different people. It is an important subject because of the fact of scarcity and the desire for efficiency.

In other words, we can say that Economics is the discipline that studies how the individual, a society, a government is making their prioritized choices in the process of using the scarce resources to gratify the various needs and wants of life.

Role of the State in an Economy

The role of the state in an economy is as follow-

1.  As a regulator of the economic system, where the state takes important economic decisions, it takes the sole responsibility to implement the economic policies and to control and punish those who don’t oblige to these economic policies.
2. As a producer or supplier of the ‘private goods and services, this includes all those goods and services which constitute the part of the market and which will be distributed among the needy according to the principles of the market mechanism. Here the state earns profit as a private enterprise.
3.  As a producer or supplier of the ‘public goods’ or the ‘social goods’, this includes the goods and services which look essential from the social justice and well-being perspective for the people. Education, healthcare, sanitation, drinking water, etc. comes under this category.

Sectors of an Economy

Every economy tries to maximize the returns of economic activities in which it is involved. Whatever be the organizing principles of an economy, the economic activities are broadly classified into three broad categories which are known as the three sectors of the economy-

Primary Sector

This sector includes the economic activities where we can use natural resources directly. These include fuels, metals, minerals, etc. In some of the economies, mining activities are considered a part of the secondary sector though we can also use direct natural resources here. Broadly, such economies term their agricultural sector as the primary sector. This is the case in India.

Secondary Sector

This sector is rightly called the manufacturing sector which uses the produce of the primary sector as its raw materials.

Since the manufacturing is done by the industries this sector is also known as the industrial sector.

Tertiary Sector

This sector includes all those economic activities where different ‘services’ are produced such as education, banking, insurance, transportation, tourism, etc.

Types of Economies

The types of economy are-

Agrarian Economy

An economy is called agrarian if the share of its primary sector is 50 percent or more in the total output (the GDP) of the economy. At the time of independence, India was an Agrarian Economy.

Industrial Economy

If the secondary sector contributes 50 percent or more to the total production value of an economy, it is called an industrial economy. In this economy, the higher the contribution, the higher is the level of industrialization.

The western economies that went for early industrialization earning faster and enough income and developing early were known as developed economies.

Service Economy

In the simplest terms we can say, a service economy is an economy where the primary economic activity is the provision of services rather than the production of goods. We can say United States has a service economy because most of the growth in the U.S. economy is tied to services.

Basic Characteristics of The Indian Economy As a Developing Country

India is a developing country in the lower-middle-income group. The basic characteristics are-

Low per capita income

Except for few countries, the per capita income (PCI) of the Indian people is the lowest in the world. Per capita income doesn’t include an individual’s savings or wealth. For example, a wealthy person might have a low annual income from not working but draws from savings to maintain a high-quality standard of living. The per capita metric would reflect the wealthy person as a low-income earner.

Heavy Population pressure

One of the major problems in India is the high level of birth rates which is also an evil effect of illiteracy. A positive attributive is the average life of citizens has increased which adds further to the working population.

Occupational pattern

One of the basic characteristics of India being an underdeveloped country is primary production. A very high proportion of the working population is engaged in agriculture, about 52 percent and its contribution to national income was only 13.9 percent in 2011-12.

Mal- distribution of Wealth/Assets

Inequality in asset distribution is the principal cause of the unequal distribution of income in rural areas. It also signifies that the resource base of 50 percent of the households is so weak that it can hardly provide them anything above the subsistence level of income.

Poor quality of human capital

The underdeveloped countries suffer from mass illiteracy. Illiteracy retards growth. A minimum level of education is necessary to acquire skills as also to comprehend social problems.

Prevalence of chronic unemployment and under-employment

In India cheap labor force is available in abundance. It is very difficult to engage in gainful employment for the entire working population, which is the result of a deficiency of capital in the country.

Role and Contribution of Some Major Industries In Economic Development

These industries play an important role in a country’s economy-

Steel Industry

From the point of view of total investment, the iron and steel industry is the most important industry. The industry provides direct employment to 2.5 lakh workers. In spite of the tremendous importance given to the iron and steel industry and the heavy investment made, our country had to import an increasingly large amount of steel.

India has ranked second in the steel industry across the world. 1 st position is secured by China.

The Cotton and Synthetic Textile Industry

The structure of the textile industry is extremely complex with the modern, sophisticated, and highly mechanized mill sector on the one hand, and on the other hand, there is spinning and hand-weaving (handloom) sector; and in between them comes the decentralized small scale power loom sector.

If we include all these sectors, the cotton and synthetic textile industry in India is the largest industry in the country, accounting for about 20 percent of the industrial output, providing employment to over 20 million persons, and contributing around 33 percent of the total export earnings.

The textile industry is the one in which India has an opportunity for success on a global scale, given the low cost of labor.

The Jute Industry

The jute industry was started in 1885. Its importance to the economy lies in its capacity to earn foreign exchange. Production of jute textiles was stagnant for many years despite all types of measures and incentives given by the Government.

The jute industry is now modernizing its post-spinning equipment with new high-speed machines and the installation of broadlooms for the manufacture of carpet backing.

The Sugar Industry

India was the fourth major sugar-producing country in the world, the first three being Russia, Brazil, and Cuba. But now India has emerged as the largest sugar-producing country in the world. The sugar industry is the second largest agro-based industry in the country.

The Cement Industry

The foundation of a stable Indian cement industry was laid in 1914 when the Indian Cement Company Ltd. manufactured cement at Porbandar in Gujarat. India is the second-largest cement producer in the world, the first is China.

The Paper Industry

The first paper mill was set up in India more than 100 years ago. The industry has operated under a protective tariff since 1925. Attracted by high profits under the protective tariff umbrella, many new paper mills were set up.

During the period of planned development, the paper industry made rapid progress, with India’s forests providing abundant raw materials for its smooth working.

Automobile Industry

With the liberalization of the economy, the automobile sector witnessed robust growth. The established manufacturers were phased out and the sector witnessed the entry of new manufacturers with state-of-the-art technology. This provided confidence to manufacturers to face international competition.

The automobile industry consists of passenger cars, multi-utility vehicles, commercial vehicles two-wheelers, and three-wheelers.

Information Technology (IT) Industry

Information technology is of recent origin, but it is spreading fast in India. However, India has a long way to go before it can catch up with the developed countries. In the information technology (IT) sector, outsourcing has acquired an international dimension.

So, that is all for today guys see you in our next blog. If you like our article please doesn’t forget to share with others & follow our Instagram page for your daily dose of Motivation.

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Grooming Urban

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