Post-Independence India – Problems of Economy

After achieving independence in 1947, India has been a developing economy. Nearly 75 years down the line, the country gradually is aspiring to become a developed nation. Nevertheless, the coexistence of the government, public, and private sectors (in a mixed economy) make it a unique economy. As per recent economic data trends, India will become the world’s third-largest economy with a GDP of $15 trillion by 2030. Right now, the country is the 4th largest economy in terms of GDP after the USA, China, and Japan, and the second-fastest-growing economy in the world after China. However, apart from these achievements, there are many challenges in the way to complete development, involving the central problems of the economy, which are: what to produce, how to produce, and in what quantities; and for whom to produce? 

Central Problems of Economy

• What to Produce? 

Every society faces a similar problem of choice ; however, priorities may be different. In less developed economies, the choice may be between food-crop production and automobile manufacturing. In advanced economies, the option may be between building more shopping malls or producing more vehicles. How then shall goods and services be delivered?

• How to produce, and in what quantity? 

This issue concerns selection techniques that must be adopted and used in producing goods and services. The two most common methods are:

LIT (Labor-Intensive Techniques)

In this technique, more labour units are used in production processes in proportion to capital.

Techniques Requiring a Large Investment

Alternatively, the capital intensive technique involves more capital and less labour utilisation; for example, footwear can be produced in factories where machines or skilled cobblers do a large portion of the work.

For Whom to Produce?

Who enjoys and benefits from the goods and services produced? It is impossible to satisfy everyone’s wants due to scarcity, so the benefactors must be decided. Should the economy produce more food crops or more computers? Whose needs are to be addressed, the economically backward or forward? Should everybody get an equal share of the total goods and services produced, even if some people may need more than others? All these decisions refer to the distribution of income and wealth in society.

Some Other Problems Facing Indian Economy, Post-Independence

Other crucial problems are listed below:

• Unequal Distribution of Income and Wealth

Not only does the Indian economy have a low per capita income, but it also has a significant income and wealth disparity. Inequalities are increasing in India with time. Mass poverty is the main problem of enormous inequity. This unequal distribution of wealth intensifies poverty. Even in 1972–73, more than half of India’s population lived in poverty. However, poverty has dropped from 36% in 1993–94 to roughly 27.5% in 2004–05, according to poverty estimates based on the Uniform Recall Period.

• Agricultural Dominance in the Economy

Agriculture and other sectors like mining, fishing, and forestry are the mainstays of less developed economies. National income, sectoral mix, and occupational patterns explain agriculture’s dominance. The agriculture sector, often known as the primary sector, contributed more than 55 % of India’s GDP in 1950–51. However, in 2007–08, it fell to 19.4%. The secondary and tertiary sectors contributed 24.9% and 55.7%, respectively. Agriculture alone generates less than one-fifth of our national revenue after 58 years of planning. The occupational structure also reveals the agricultural sector’s dominance and the industrial sector’s backwardness. In India, agriculture employed 52% of the population in 2004–05. Even though agriculture is India’s most important economic sector, it lags behind the times.

• Population Explosion in India

The population growth rate is high in the country. India is the second-largest country by population, trailing behind China (131.2 crores in 2006). In 2006–07, India’s population was 116.5 crores. During 1991, India’s population grew at a pace of 1.61% per year, compared to 0.7% in developed countries. India’s population growth is a high birth rate (23.5 per 1000) combined with a low mortality rate (7.5 per 1000 in 2005–06). India’s population increased by 5% throughout the twentieth century, compared to a global increase of only 3%. Due to this massive population growth, the resources become more scarce, and the economy struggles. So population explosion is another central problem of the economy.

• Increasing Unemployment Rate

Natural resources are underutilised, but human resources have also not been used in large amounts. Slow economic growth and high population increase, on the other hand, have exacerbated India’s unemployment crisis. Between 1971 and 1999, the rate of unemployment in India surged about ten times. Despite a 2.5% yearly growth in the number of job seekers, work opportunities increased at a slow rate of 1.8%. In 2006–07, there were 4.7 crores registered job searchers. Since the start of economic reforms, unemployment has been steadily growing. In 1993–94, it was 1.96%; in 2004–05, it was 2.39%. Not only that, but Indian agriculture has a high rate of underemployment and hidden unemployment. We also see disguised unemployment in metropolitan areas. Despite substantial investments made throughout the plan period, this problem has grown enormously, which is ironic. It equates to a massive waste of human capital. It is another central problem of the Indian economy.

Conclusion

The central problems of the Indian economy include per capita income, uncontrolled population growth, agricultural dominance, unequal distribution of wealth, and unemployment rate. Therefore, we have to figure out the problem and work towards it to enhance India’s socio-economic development progress.