Indian Economy

course code: Eco213

Dr. Sonam Choephel,
Economics Department,
ID:26712
What is Economics?
What is Economy?
Difference between Economics and Economy.
Meaning of Development
Indicators of Development
Measures of Development
Difference between Growth and Development
Underdevelopment: Meaning and Indicators
Common Characteristics of Underdeveloped/Developing Countries
 Introduction to Economics
• Economics: Economics is the study of how societies use scarce resources to produce valuable
commodities and distribute them among different people.
• Two type of Economics: Micro and Macro.
• Economics and Economy: The relation between economics and the economy, is that of theory and
practice.
• The term ‘Economy’ is defined as a social domain that stresses the importance of practices,
discourses associated with the production, use, and management of resources.
• Economy is economics at play in a certain region. This region is best defined today as a country, a
nation—the Indian Economy, the Russian Economy, the French Economy, etc. Economy as such
means nothing.
 Meaning of Economic Development and its
indicators
• Economic development is an attainment of higher level of productivity in
almost all the sectors and a better level of living for the general masses.
• Economic Development is influenced by natural resources and both
economic and non economic factors.
- Natural Resources – According to Jacob Viner “much obviously depends
on the character of the physical environment, or the “quality” of the
natural resources considered as factors of production. An unfavorable
physical environment can be a major obstacle to development”
 Role of Economic Factors in Economic
Development
• Capital formation
• Marketable Surplus of agriculture
• Condition in foreign trade
• Economic System
 Non-Economic Factors in Economic
Development
• Human Resources
• Urge for development
• Political Freedom
• Changes in social and institutional factors
• Corruption
 Measure of Economic Development
• GNP Per Capita
• Optimum level of population
• Urbanization
• Infrastructure
• Social Condition
 GNP Per capita
GNP :- Gross national product (GNP) is an estimate of total value of all the
final products and services turned out in a given period by the means of
production owned by a country's residents. GNP is calculated by taking sum
of – personal consumption expenditure, private domestic investment,
government expenditure, net exports, and any income earned by residents
from overseas investment minus income earned within the domestic
economy by foreign residents.
Optimum Level of Population
By optimum population we mean the ideal number of population that a country should have considering its
resources. The optimum size of population is which along with the existing natural resources and a given state of
technology, yields the highest income per capita in a country.
 Urbanization
• Urbanization is the process through which cities grow, and higher and
higher percentages of the population comes to live in the city.
• The level of urbanization and economic development are positively
related. An increase in concentration of population at one place yield
many positive externalities increasing productivity and efficiency.
• India is a comparatively less urbanized country but still around 60.0
percent of total GDP is generated in urban areas.
 Infrastructure
• Development of Infrastructure is a sine qua non of economic
development. For instance, development of agriculture depends on the
adequate expansion and development of irrigation facilities. Industrial
progress depends on the development of power and electricity generation,
transport and communication. Therefore, if proper attention is not paid to
the development of infrastructure, it is likely to act as a severe constraint
on economic development process in the country.
 Social Condition

Literacy rate : the total percentage of the population of an area at a particular time aged seven years or above
who can read and write with understanding.
Life Expectancy :- Life expectancy, estimate of the average number of additional years that a person of a given
age can expect to live. The most common measure of life expectancy is life expectancy at birth.
Health care :- Healthcare expenditure can result in better provision of health opportunities, which can strengthen
human capital and improve the productivity, thereby contributing to economic performance. Many researcher
found that there is positive correlation between healthcare expenditure and the economic indicators of income,
GDP, and labor productivity.
Infant mortality :- The infant mortality rate is the number of infant deaths for every 1,000 live births.
In 2019, the infant mortality rate in India was at about 28.3 deaths per 1,000 live births, a significant decrease
from previous years. The current infant mortality rate for Japan in 2021 is 1.644 deaths per 1000 live births.
Economic Development Vs Economic Growth

• Economic development is defined as a sustained improvement in material well

being of society. Economic development is a wider concept than economic
growth. Apart from growth of national income, it includes changes – social,
cultural, political as well as economic which contribute to material progress.
• . It contains changes in resource supplies, in the rate of capital formation, in
size and composition of population, in technology, skills and efficiency, in
institutional and organizational set-up. These changes fulfill the wider
objectives of ensuring more equitable income distribution, greater
employment and poverty alleviation.
 Economic Growth
• The term economic growth is defined as the process whereby the country’s real
national and per capita income increases over a long period of time.
a) Economic Growth implies a process of increase in National Income and Per-
Capita Income.
b) Economic Growth is measured by increase in real National Income and not just
the increase in money income or the nominal national income.
c) Increase in Real Income should be Over a Long Period
d) Increase in income should be based on Increase in Productive Capacity:
 Economic Growth Economic Development

Meaning Economic growth refers to an increase in the real Economic development implies changes in income,
output of goods and services in the country savings and investment along with progressive changes
in socioeconomic structure of country (institutional and
technological changes).

Factors Growth relates to a gradual increase in one of the Development relates to growth of human capital,
components of Gross Domestic Product: decrease in inequality figures, and structural changes
consumption, government spending, investment, that improve the quality of life of the population.
net exports.

Measurement: Economic Growth is measured by quantitative The qualitative measures such as HDI (Human
factors such as increase in real GDP or per capita Development Index), gender- related index, Human
income poverty index (HPI), infant mortality, literacy rate etc.
are used to measure economic development.

Effect Economic growth brings quantitative changes in Economic Development leads to qualitative as well as
the economy. quantitative changes in the economy.

Relevance: Economic growth reflects the growth of national Economic development reflects progress in the quality
or per capita income. of life in a country.