INTRODUCTION OF INDIAN ECONOMY

Economy defines the condition of a country in respect with production, consumption of goods and services and supply of money. The study of economy of any country helps us in finding out financial condition of the population as well as the different working sector of economy. It also helps in comparing the economic condition of different countries. The economy of India is the 7th largest in the world by nominal GDP and the 3rd largest by Purchasing Power Parity (PPP). In the Indian GDP, service sector's contribution is maximum followed by manufacturing and agriculture.

Characteristics of Indian Economy

Presently, Indian economy is a developing economy. Following are the five main characteristics of Indian economy

1. More than 50% of population is engaged in the field of agriculture and related activities.

ii. Both private and public sector co-exists. India opted for mixed economy in Industrial Policy of 1948.

iii. Low per capita income (income per person, it is calculated by measuring total income from all sources and dividing it by the total population).

in. More people are employed in the primary stor Prevalence of under-employment and unemployment and unequal-distribution of wealth and assets.

Sectors of Indian Economy

Following are the three major sectors of Indian economy

1. Primary Sector It is directly depend on environment as these refers to utilisation of Earth's resource ex-land and water. eg agriculture, forestry, fishing. This sector contributes 17% (approx) in Indian economy.

il. Secondary Sector It adds values to resources available on Earth and transform these resources into valuable product. eg manufacturing, mining, electricity, construction. This sector contributes 32% (approx) in Indian economy.

iii. Tertiary Sector It is also known as Service Sectar. In this different services are produced, eg. business, transport, communication, banking, insurance etc. This sector contributes 51% (approx) in Indian economy.

The other sectors of economy are as follow

Quaternary Sector It is also a kind of service sector, but this sector is specifically based on knowledge. e.g. information technology, research, media, consultancy etc.

Quinary Sector It is a top economic sector. High level decision are made by top-level executive in the government, industry and non-profit organisations.

NATIONAL INCOME

• National income measures the net value of goods and services produced in a country and net earned foreign income during a year. National income is a flow not a stock and it measures the flow of goods and services in an economy.

• To estimate the National Income, first attempt was made by Dadabhai Naoriji in his book, Poverty and Un-British Rule in India.

• Professor VKRV Rao in 1931, divided Indian economy into 13 sectors.

• The Government of India appointed a National Income Committee under the chairmanship of Dr PC Mahalanobis in 1949.

• In January 2015, the Central Statistical Organisation (CSO) introduced the new series of National Accounts Statistics (NAS) with the base year 2011-12 (Seventh series of the base year) in place of the previous series with the base year 2004-05.

Concepts of National Income

Six main concepts of National Income are as follow

i. Gross Domestic Product (GDP) It is a market value of all goods and services produced within the country. GDP includes net indirect tax and depreciation. GDP is the primary measure of National Income.

If GDP is calculated at current market price, it is called as Nominal GDP and when GDP is calculated at a price of base year it is called Real GDP.

ii. Gross National Product (GNP) It is the monetary value of goods and services produced by citizens of country in the country and outside the country.

iii. Net National Product (NNP) It is obtained by subtracting depreciation value from Gross National Product. Depreciation is the decrease in the monetary value of assets due to use, wear and tear.

iv. Net Domestic Product (NDP) The NDP equals the Gross Domestic Product minus depreciation on a country's capital goods. NDP accounts for capital that has been consumed over the year in the form of housing, vehicle or machinery deterioration. NDA GDP Depreciation

v. Per Capita Income (PCI) It is a measure of the amount of the money that is being earned per person in a certain area.

Per Capita Income of a country = 

National Income / Population of the Country 

vi. Gross Value Added (GVA) It is a measure of the value of goods and services produced in an area, industry or sector of an economy. In national accounts, GVA is output minus intermediate consumption, it is a balancing item of the national accounts and production accounts.

Human Development Index (HDI)

The United Nations Development Programme (UNDP) introduced the HDI in its first Human Development Report (HDR), prepared under the stewardship of Mahbub-ul-Haq in 1990 HDR. It defined human development as the process of widening people's choices as well as raising the level of well being achieved.

Three main indicators of HDI are as follow

i. Life Expectancy Index

ii. Educational Attainment Index

iii. Standard of Living Index

• In the 2015 report of HDR, India with a score of 0.609 has been ranked 130 out of 188 countries in terms of HDI.