SESSION-2Anatomy of the Indian Economy

A. An overview of the Indian economy.B. Analysis of the sectors of the Indian

economy.C. SWOT Analysis of the Indian economy.

Anatomy, literally means • the act of dividing into parts for the purpose of analyzing / examining

the parts to reveal the structure of the parts.

Anatomy of the Indian economy means

• analysing/ studying/ examining the nature/ characteristics of the Indian economy, by dividing the economy into parts/ sectors.

A. AN OVERVIEW OF THE INDIAN ECONOMY

a) Characteristics of the Indian economy(during the pre independence period)

The economy was

• a ‘stagnant economy’ with extremely low growth rate of per capita income &

• a ‘backward economy’ with characteristics like

i. Predominance of agriculture (An agrarian economy)

ii. High birth rate & high death rate

iii. Low per capita income

iv. Mass poverty

v. Mass illiteracy

b) Characteristics of the Indian economy(during the post independence & pre-liberalization period)

• Predominance of agriculture• High population growth rate• Low per capita income• Balance of payments crisis• Low foreign exchange reserves• Extensive regulation of the private sector• Protectionism policy with strong emphasis on import

substitution• High fiscal deficit in the government budget

c) Characteristics of the Indian economy(in the post liberalization period, under the LPG Policy)

• Increase in the rate of economic growth• Increase in foreign direct investment• Increased investment in the private sector• Increased foreign currency reserves• Upgradation of technology• Control of inflation• Surplus in the balance of payments• Increased competition from MNCs• Unequal & unfair competition with foreign goods

Current Indian economy at a glance• By 2008 India had establised itself as the 2nd fastest growing economy

of the world (GDP growth rate close to 9%. However, in 2009 India recorded a GDP growth rate of 6.8%(under the impact of global recession), which was expected to be 7.7% in 2011-12 but ended up with 6.5% only)

• As per World Bank Periodic Reports, Indian economy was the 4th largest economy in the world in terms of nominal GDP ($1.631 trillion, in 2008-09), but has slipped to become 11th largest economy in the world in terms of nominal GDP ($1.85 trillion, 2011)

• India is the 2nd most populous country with a large population of 1.21 billion, with a growth rate of 1.31% per annum (Census 2011),

• Per capita income of India crossed Rs. 50,000 mark in 2010-11. It grew by 15.6% to Rs.53,331 per annum in 2010-11. However, this figure at constant prices was Rs. 35,993 per annum, with a growth rate of 6.4% per annum. (As per ‘Central Statistical Organisation’ estimates of GOI)

B. ANALYSIS OF THE SECTORS OF THE INDIAN ECONOMY

Indian economy has been classified into different sectors on the following basis:-

1. Sectors on the basis of economic activities-• Primary sector (Agricultural sector)• Secondary sector (Industrial sector)• Tertiary sector (Service sector)

2. Sectors on the basis of ownership of means of production-

• Private sector• Public sector• Joint sector

A comparative study of the 3 sectors(clearly reveals ‘structural change’ in the Indian economy)

• Contribution of different sectors to GDP

SECTOR 1950-51

(%)

1990-91

(%)

2010-11

(%)

Primary sector

Secondary sector

Tertiary sector

59

25

16

29

29

42

18

22

60

SECTOR 1950-51

(%)

1990-91

(%)

2010-11

(%)

Primary sector

Secondary sector

Tertiary sector

72

11

17

66

14

20

52

14

34

• Occupational distribution of labour force

C.SWOT ANALYSIS OF THE INDIAN ECONOMY

STRENGTHS WEAKNESSES

• Huge pool of labour force• High percentage of cultivable land• Huge English speaking population (availability of skilled manpower)• Extensive higher education system

( 3rd largest reservoir of engineers)• High growth rate of the economy• Rapid growth of IT & BPO sector bringing valuable foreign exchange

( IT & software superpower)• Abundance of natural resources• Stable economy

• Very high percentage of workforce engaged in agriculture• Around 1/4th of the population living below poverty line• Scarcity of resources due large population size• Inequality in the distribution of income• Low productivity• Poor infrastructural facilities• Corruption, malpractices & bureaucratic control.

SWOT Analysis contd.OPPORTUNITIES THREATS

• Scope for entry of new firms in various sectors of business (LPG)• Inflow of foreign capital is likely to increase in different sectors. (LPG)• Huge foreign exchange earning prospects in IT & ITES sector• Investment in R & D• Huge scope in the area of biotechnology• Vast natural resources, wildlife, fishing & livestock• Scope for investment in infrastructure• Huge domestic market

(opportunities for MNCs to sell)

• Global economic recession• High fiscal deficit ( 4.7% of GDP)• Growing import bill• High of crude oil prices• High growth rate of population• Lack of irrigation facility, agriculture still dependent on monsoon in many areas• Governmental intervention • High rate of inflation• Low investment level, leading to declining economic growth.• Depreciating Indian national currency