Indian Economy under Dualism

The below mentioned article provides short notes on Indian economy under dualism.

At present, the Indian economy is characterised by a dualistic economic structure where a modern economy is existing along-with a primitive traditional economy. Dualism is one of the important characteristics of an underdeveloped economy. Thus under dualism, two sectors, i.e., modern or advanced sector and traditional or backward sector exist and operate side by side.

Dualism may be broadly of two types, i.e., technological dualism and social dualism. Technological Dualism, as Benjamin Higgins mentions it in his book ‘Economic Development’, indicates the applications of different production functions in the advanced sector as well as in the traditional sector. Under this dualism, advanced sector is capital-intensive and backward sector is labour-intensive.

Again Social Dualism, as mentioned by J.H. Boeke in his book ‘Economies and Economic Policy of Dual Society’, indicates two different strata, i.e., upper strata and lower strata in the society. Boeke’s social dualism indicates presence and conflict of an alien social system with an indigenous social system of the country itself.

In India, social dualism and such consequent conflict is absent. But in Indian economic structure, technological dualism prevails. In this type of dualism, “productive employment opportunities are limited; not because of lack of effective demand, but because of resources and technological restraints in the two sectors.”

In a less developed country like India, the economy is represented by traditional rural sector characterised by peasant agriculture, small and cottage industries and handicrafts which are largely adopting labour-intensive techniques of production.

On the other hand, the economy is also supporting an advanced modern sector consisting of large-scale industries, like mining industries, iron and steel, plantations, power plants etc. which are characterised by fixed technical coefficients, lower degree of substitutability of factors and largely adopting capital-intensive techniques of production.

Again India is facing a peculiar situation where the country is facing population explosion resulting from increasing natural growth rate of population and slow growth of employment opportunities in the industrial sector due to its fixed technical coefficients.

Due to this low rate of absorption of labourers in the industrial sector, more and more labourers are being engaged in the agricultural sector due to its variable technical coefficients.

This increasing absorption of labour force in the agricultural sector has resulted in an increase in the ratio of labour to both land and capital. Moreover, the increasing absorption of labour has been resulting disguised unemployment in the agricultural sector. Due to this excess labour supply, labour productivity, levels of technology, pace of mechanisation remain low in agricultural sector.

Another peculiarity of technological dualism exists in the Indian labour market where an artificially high wage rates prevail among the organised industrial labourers due to increasing trade union activity and direct intervention by the government in the labour market. Simultaneously, the level of wages in the unorganised rural sector remained low.

Thus considering all these peculiarities, Indian economy can be considered as a dualistic economy.