Top 11 Features of a Developing Economy

The following points highlight the top eleven features of a developing economy. Some of the features are: 1. National Income 2. Composition of National Income 3. Capital Formation 4. Agricultural Development 5. Industrial Development 6. Changes in Industrial Organization 7. Expansion of Infrastructural Facilities and Others.

Developing Economy: Feature # 1.

National Income:

In India the  national income of the country has been increasing at a slow but steady pace. It can be seen that the national income of India at 2004-05 prices has increased from Rs 2, 69,724 crore in 1950-51 to Rs 49,58,849 crore in 2011-12 registering a growth rate of 1738.5 per cent during the last 61 years.

In 2014-15, the national income at 2011-2012 prices stood at Rs 94, 00,246 crore as compared to Rs 78,48,531 crore in 2011-12 showing a growth rate of 19.8 per cent over the last 4 years.

Moreover, the national income in India at current prices has increased from Rs 9,820 crore in 1950-51 to Rs 1,12,17,079 crore in 2014-15 which shows a growth of 1141 times during this period of 64 years.

The growth rate of Net National product at 2004-2005 prices in India has also increased from 3.5 per cent in 1951-52 to 4.7 per cent in 1970- 71 and then to 91 per cent in 2006-07 and finally to 7.4 per cent in 2014-15 (at 2011-2012 prices).

Again the per capita income figure at constant prices (2004-2005) has increased from Rs 7,513 in 1950- 51 to Rs 41,255 in 2011-12 registering growth rate of 449.1 per cent during these last 61 years. In 2014-2015, the per capita income at 2011-12 prices stood at Rs 74,193 as compared to Rs 64,316 in 2011-12 registering a growth rate of 15.3 per cent over the last four years.

Further, the per capita income of India at current prices has increased from Rs 274 in 1950-51 to Rs 88,533 in 2014-2015 showing a growth of 323 times during the period of 64 years.

Developing Economy: Feature # 2.

Composition of National Income:

The sectoral contribution of national income is an important indicator of the degree of development attained in the economy. The contribution of primary sector which is composed of agriculture, forestry, fishery and mining has gradually declined from 56.4 per cent of GDP in 1950-51 to 45.8 per cent in 1970-71 and then finally to 19.07 per cent in 2014-2015.

The contribution of agriculture alone has also declined from 48.6 per cent of GDP in 1950-51 to 39.7 per cent in 1970-71 and then to 24.0 per cent in 1996-97.

But the contribution of the secondary sector has been increasing from 15.0 per cent of GDP in 1950-51 to 22.3 per cent in 1970-71 and then to 28.35 percent in 2014-2015. At the same time, the contribution of the tertiary sector to the national income has also increased from 28.5 per cent of GDP in 1950-51 to 31.8 per cent in 1970-71 and then to 52.58 per cent in 2014-2015. This is an important indicator of developing economy.

Developing Economy : Feature # 3.

Capital Formation:

Capital formation is playing an important role in accelerating the pace of economic growth of a country. It would be of high interest to look into the estimates of gross domestic savings in India since the inception of planning. During the first four decades of planning, the rate of gross domestic savings has increased considerably.

The CSO estimates show that the rate of gross domestic savings as per cent of GDP (at current prices) which was only 10.4 per cent in 1950-51 has gradually increased to the level of 10.5 per cent, 11.9 per cent and 12.7 per cent at the end of First, Second and Third Plan respectively.

The same rate reached at the level of 18.4 per cent at the end of Fourth Plan, 23.2 per cent at the end of Fifth Plan and then slid down to 18.2 per cent at the end of Sixth Plan. It again rose to 22.4 per cent at the end of the Seventh Plan and then to 23.6 per cent at the end of the Ninth Plan.

Similarly, the rate of gross domestic capital formation (i.e., the rate of investment) has also increased considerably during the last five decades of planning. The rate of .gross domestic capital formation which was only 10.6 per cent at the end of the First Plan has gradually increased to 13.5, 15.1 and 19.1 per cent at the end of Second, Third and Fourth Plan respectively.

The same rate of investment further increased to 23.3 per cent, 19.7 per cent, 25.1 per cent and 23.0 per cent at the end of Fifth, Sixth, Seventh and Ninth Plan respectively.

In 2006-07, i.e., at the end of Tenth Plan, the rate of gross domestic savings and rate of gross domestic capital formation were 34.8 per cent and 36.0 per cent respectively. In 2013-14, at the 2nd year of Twelfth Plan, the rate of gross domestic savings and rate of gross domestic capital formation were 30.6 per cent and 32.5 per cent respectively.

Thus it is found that the rate of capital formation in India has been increasing steadily as well as consistently.

Developing Economy: Feature # 4.

Agricultural Development:

In India, the agricultural sector has attained a considerable level of development during the five decades of planning. Moreover, agriculture is occupying a pivotal position in respect of overall economic growth by contributing towards supplies of food, raw materials and exports.

The total agricultural output has increased considerably. The total production of food grains has also increased from 55.0 million tonnes in 1950-51 to 264.8 million tonnes in 2013-14.

The average yield per hectare of principal crops in India has also recorded an increase from 5.5 quintals in 1949-50 to 7.6 quintals in 1964-65 and then to 21.01 quintals in 2013-14. The production of sugarcane has registered an increase from 50 million tonnes in 1950-51 to 350 million tonnes in 2013-2014.

The production of cotton and jute has also increased from 50 lakh bales and 25 lakh bales in 1950-51 to 367 lakh bales and 116 lakh bales in 2013-2014 respectively.

Thus it is found that with the modernisation of agricultural sector, the production of various agricultural crops in India has increased considerably as a result of increasing use of chemical fertilisers, HYV seeds and improved techniques of production. The total development of irrigation potential in India has also increased from 23 million hectares in 1950-51 to 102.8 million hectares in 2006-2007.

As a result of all these developments, the per capita availability of foodgrains and pulses has registered an increase from a mere 395 grams in 1951 to nearly 436 grams per day.

Thus it is found that with the implementation of planning schemes, the agricultural sector of the country has attained a considerable level of development although these developments remained very much restricted to some particular regions of the country. This shows that there is wide scope for further development of the agricultural sector.

Developing Economy: Feature # 5.

Industrial Development:

As a result of the planned development, the industrial sector of the country has achieved considerable progress. During the last 61 years of planning, the industrial production in the country has also increased significantly. Accordingly, the index of industrial production (Base = 1993-94) has also increased from 7.9 in 1950-51 to 28.1 in 1970-71, 91.6 in 1990-91 and then to 316.2 in 2009-2010.

Again the same index of industrial production (Base 2004-05) increased from 108.6 in 2005-06 to 172.0 in 2013- 14. During the initial period of 15 years (1951-65), i.e. during the first three plan periods, Indian industries experienced a steady growth of about 8 per cent.

During the second phase of industrial growth (1965-80), the annual compound growth rate of industrial production sharply declined to only 4.1 per cent during the entire period covering 1965 to 1976 and then to a negative annual growth rate of (-) 1.6 per cent in 1979-80.

During the third phase of industrial growth (1981-1991) the industrial sector started to face recovery in its growth rate and attained 8.5 per cent growth rate during the Seventh Plan.

During the Fourth phase of industrial growth (1991-92 to 2006-07), the country experienced a sharp industrial retrogression during the first part of Eighth Plan as the country had to experience a negative industrial growth rate of (-) 0.10 per cent in 1991-92.

The country then experienced an industrial upturn of 11.7 per cent in 1995-96 and then to 11.6 per cent in 2006- 07 and then declined to only 4.5 per cent in 2013-14. The industrial production of some important industries has also recorded a considerable increase during the last 62 years of planning.

The production of finished steel has increased from 1.04 million tonnes in 1950-51 to 73.4 million tonnes in 2011-12 and that of fertiliser (NPK) has increased significantly from 18 thousand tonnes in 1950-51 to 25,946 thousand tonnes in 2011-12.

Total production of cement has also increased from a mere 2.7 million tonnes in 1950-51 to 223.5 million tonnes in 2011-12. The volume of petroleum refinery products has also increased from 0.2 million tonnes in 1950-51 to 196.7 million tonnes in 2011-12. Production of cotton textile has also increased significantly from 4215 million sq. metres in 1950-51 to 30,570 million sq. metres in 2011-12.

Again the production of sugar and tea has also increased significantly from 1134 thousand tonnes and 277 million kg in 1950-51 to 27.430 thousand tonnes and 972 million kg respectively in 2013-14. Production of machine tools industry has also increased by more than 7,880 times.

Total volume of electricity generated has also increased from 5.1 billion kWh in 1950-51 to 1014.8 billion kWh in 2013-14. Thus it is found that the industrial sector in India has attained a considerable progress and has also become successful to diversify its structure.

Developing Economy: Feature # 6.

Changes in Industrial Organisation:

The industrial organisation has also recorded a considerable development. The public sector investment has also attained a considerable proportion in industry and has sustained the industrial transformation. The share of public sector in net domestic product (NDP) at current price has increased from 7.5 per cent in 1950-51 to 24 per cent in 1990-91.

Again the share of public sector enterprises only (excluding public administration and defence) in NDP was also increased from 3.5 per cent in 1950-51 to 14.4 per cent in 1990—91. The share of public sector in gross domestic capital formation has also increased from 3.5 per cent during the First Plan to 12.1 per cent during the Seventh Plan.

The contribution of public sector towards employment generation has also increased from 11 million persons in 1971 to about 19.2 million Persons in 1992 showing about 75 per cent increase during the period, which was again nearly 7.13 per cent of the total employment generated in the country.

The share of public sector in the value added in industry (i.e., mining, manufacturing, electricity, construction, water supply and gas) has also recorded an increase from 6.9 per cent in 1960-61 to 28.0 per cent in 1996-97. Simultaneously, the private sector and joint sector have also grown considerably in respect of its industrial organisation and diversified its activities to a considerable extent.

Developing Economy: Feature # 7.

Expansion of Infrastructural Facilities:

In India, the infrastructural facilities have also expanded to a significant extent. These facilities include development of social infrastructure like transportation and communication facilities, generation of electricity, irrigation facilities etc. and also the development of financial infrastructure like the growth of banking, and non-banking financial institutions, insurance organisations etc.

In India there are broadly four important modes of transport and these are Railways, Roads, Water transport and Air transport. Among these four, the rail and road system dominates over the entire system of the country.

Being the Asia’s largest and World’s second largest organisation in terms of route length, Indian Railways has expanded its total route length from 53,600 kms in 1950-51 to 65,800 kms in 2013-2014. Again the total length of roads has also increased from 4 lakh kms in 1950-51 to nearly 49.49 lakh kms in 2012-13.

Total length of national highways now stands at 79,100 kms. About 64 per cent of the villages of our country have a rural road network. The share of Indian shipping in the transportation of cargo in our overseas trade has increased from 0.2 million GRT in 1950-51 to 7.02 million GRT in 1996-97. At the end of March 2003, the fleet strength was 616 vessels with its capacity of 6.17 million GRT and 10.06 million DWT.

The air transport facility has also been expanded significantly. Total number of passengers handled at Airports has also increased from 177.23 lakh in 1990-91 to 1389.0 lakh in 2013-14 and the volume of cargo handled has also increased from 377.33 thousand tonnes in 1950-51 to 2279.15 thousand tonnes in 2013-14.

In respect of financial infrastructure, the banking network has been expanded considerably. Commercial banks of the country have attained significant progress since their nationalisation in 1969. The aggregate credit of scheduled commercial banks has increased from Rs 3,599 crore in June 1969 to Rs 69, 40,702 crore in December 2014.

Total number of branches of all commercial banks has increased from 8,262 in 1969 to 1, 21,535 in June, 2014.

The share of the priority sectors like agriculture, small scale industries and transportation to total bank credit has increased from 12 per cent in June 1969 to 39.0 per cent in March 2014. The insurance organisations have also expanded its network covering both life and general insurance activities.

The Government has also set up a variety of financial and other institutions so as to assist the agriculture and industrial sectors in respect of provision of raw materials supply, marketing, storage, research, technology and infrastructure.

Developing Economy: Feature # 8.

Development of Human Resources:

In respect of development of human resources, India has achieved a moderate rate of success. The major components of human resource development include expansion of social infrastructure for making adequate provision for education, health care, water supply, sanitation and social security.

The system of elementary education in India is the second largest in the world with 151.5 million children enrolled in 1996-97 in the age group of 6 to 14 years, covering about 81 per cent of the children in this age group.

Total number of primary schools has increased substantially from 2.10 lakh in 1950-51 to 7.14 lakh in 2011-12. As on December 1996, 417 districts have been covered either fully or partially under the Total Literacy Campaign. The District Primary Education Programme (DPEP) introduced in 1994 has been in operation in 59 districts of eleven states of the country.

India is committed to achieve “Health for all” by 2000 A.D. as it is signatory to the Alma-Ata-Declaration of 1978.

Total number of doctors has increased from 61,840 in 1951 to 6, 55,135 in 2008, i.e., by 10.5 times and that of nurses by 5.2 times. Total number of hospitals has increased from 2,694 in 1951 to 15,900 in 2008, i.e. by 6 times. Total number of medical colleges has also increased from 28 in 1951 to 268 in 2008. Total number of hospital beds has also increased from 1.17 lakh in 1951 to 9.14 lakh in 2008, i.e., by 7.8 times.

As a result of this, the average life expectancy at birth in India has gradually increased from 41.2 years in 1951-61 to.6.7.5 years in 2013. The infant mortality rate has declined from 146 per thousand live births during 1951 to 40 per thousand in 2013.

Moreover, the percentage of rural and urban population covered with safe drinking water facilities has increased from 56.3 per cent and 72.9 per cent respectively during 1985 to 82.7 per cent and 91.4 per cent respectively in 2011.

Moreover, a massive programme for providing sanitation facilities has been developed and by March 1996, about 4.64 per cent of rural population and 50.0 per cent of urban population have been covered with sanitation facilities.

Developing Economy: Feature # 9.

Exports:

The volume of export in India has also recorded a considerable increase in recent years. Total value of exports in India has increased from a mere Rs 947 crore in 1950-51 to Rs 19, 05,011 crore in 2013-2014. With the gradual diversification and growth of the industrial sector, India started to export various types of non-traditional products.

Accordingly, the share of jute, tea and cotton textiles in the total export earning of the country gradually declined from 60 per cent in 1950-51 to 31 per cent in 1970-71 and then to 2.5 per cent in 2013-14. But the share of machinery and engineering goods in India’s total export increased gradually from a mere 2.1 per cent in 1960-61 to 12.9 per cent in 1970-71 and then stood at 19.7 per cent in 2013-14.

Developing Economy: Feature # 10.

Employment Generation:

With the gradual development of various sectors of the economy, the country started to generate employment opportunities for the people of the country. The volume of employment generated in India during the First, Second and Third Plan was to the extent of 70 lakh, 100 lakh and 145 lakh respectively.

During the Fourth, Fifth, Sixth and Seventh Plans, the volume of employment generated was of order of 190 lakh, 154 lakh, 468 lakh and 403.6 lakh respectively.

The continuation of the strategy during the Ninth Plan generated 47.5 million additional employments during the period 1997-2002. The Eleventh Plan is expected to generate around 58 million additional employment opportunities.

Thus the present employment strategy is expected to wipe out the entire backlog of open unemployment and a sizable part of the severe under-employment in the country by the year 2017.

Developing Economy: Feature # 11.

Poverty:

The incidence of poverty in India has also been declining in recent years. The Planning Commission estimates of poverty shows that the proportion of total population lying below the poverty line has declined from 54.9 per cent in 1972-73 to 38.9 per cent in 1987-88 and then to 21.9 per cent in 2011- 12. This is no doubt a significant achievement of the country.

Thus, it is found that during the last 64 years of planning period, India has achieved a considerable progress on various fronts. Considering the level of development achieved both in agriculture, industry, infrastructure and other areas of the country, Indian economy can be broadly termed as a planned developing economy.