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Indian Economy After Independence

Senthuran

It is paradoxical that India is a rich country (in terms of enormous natural and man power resources) with poor people. India adopts a mixed economic model, which is tending towards economic liberalization in order to attain self-reliance.

Indian economy is characterized by lower per capita income, mass unemployment and under employment, over-dependence of agriculture, over population, poor standard of living, low level of capital formation, low levels of health and education facilities, etc. Indian population, instead of being an asset, has most often proved to be a liability and economic distress. This calls for more attention by the Government in the upliftment of the population. Thus, any economic policy treatment in India will be viewed with a social mind frame.

During 1901, urban population, which was at 10.8 per cent of total population has increased to 25.7 per cent during 1991. Further, almost the entire rural population of 1901 (213 million) lives in urban India during 1991 (218 million). This indicates the extent of migration.

Savings and capital formation are very important for a country’s economic development. The gross domestic savings which was at Rs 2544 crore in 1960-61 rose to Rs 157186 crore in 1992-93. The contribution of household sector to savings is the largest in India, followed by public sector and private corporate sector. The rate of savings in India to GDP is not satisfactory due to several reasons, such as, low per capita income, poor performance of public sector enterprises, poor contribution of private sector players and untapped rural savings potential.

It is worth noting that the gross savings of corporate sector, for the period 1960-61 to 1992-93, indicates an annual average growth rate of 14.23 per cent. However, when the savings and capital formation in the private corporate sector are compared with the gross domestic savings and capital formation, it has remained at more or less the same proportion around one-eighth of the total domestic savings. This is an indication of the corporate sector’s dependence on household sector savings for its long term capital requirements, which has led to a broad based structure of share ownership pattern.

Indian economy has come a long way, especially after independence. Since independence, the structure of the Indian economy has gone through several changes, out of which sectoral contribution to the economy is the most vital one. The agricultural contribution to GDP is declining gradually as seen in the Table below. While the contribution of industrial sector has not improved to a great extend, the service sector’s contribution to GDP has notably increased. One of the main reason for this change can be attributed to the economic policies of India.

Sectoral Share in National Income

		(figures in percentage)
	1970-71	1995-96
Agriculture	50	29
Industry	20	28
Service	30	43

It has to be noted that though the contribution of agriculture to GDP has declined, still majority of the population (around 67 per cent as per 1991 census) is depend on primary sector. This is the reason for the failure of many multinationals in India. They fail to notice this fact and over estimated the demand potential of their products.

Therefore, India is not just another country. It has to its credit its own socio-economic features.