Unit 1: Structure & problems of the Indian economy

Sectoral structure (share in Gross Value Added, approximate)

• Structural change: share of agriculture in output has fallen sharply since 1950–51 (from over 50%), but employment has moved slowly — India skipped a large manufacturing phase and moved to services.
• India is among the world's five largest economies in nominal terms and the third-largest in purchasing-power parity (mid-2020s).

• Human Development Index (UNDP): life expectancy, education (mean and expected years of schooling) and Gross National Income per capita.
• Sustainable development: development that meets present needs without compromising the ability of future generations to meet theirs (Brundtland Report, 1987); SDGs 2030.
• Determinants of development: natural resources, capital formation, human capital, technology, institutions, entrepreneurship, political stability.

• India moved from stage 2 (1951–1981, "population explosion") into stage 3; total fertility rate is now around 2.0 — at or below replacement level (NFHS-5).

Demographic features (Census 2011 and later estimates)

• Causes of rapid growth: high birth rate (early marriage, illiteracy, preference for sons, poverty), sharp fall in death rate (medical facilities).
• Effects: pressure on land, food and housing, unemployment, low per capita income, strain on education and health, environmental degradation.
• Demographic dividend: a large working-age population can boost growth if it is educated, healthy and employed.

Poverty

• Absolute poverty: inability to meet minimum needs; measured by a poverty line (Tendulkar, Rangarajan committees).
• Relative poverty: poverty compared with others' incomes.
• Multidimensional Poverty Index (NITI Aayog/UNDP): health, education and living standards — the share of multidimensionally poor fell from about 25% (2015–16) to about 15% (2019–21) and further later.
• Causes: low growth in agriculture, unemployment, population growth, inequality, inflation, illiteracy, social factors.
• Measures: MGNREGA (100 days of wage employment), PM-KISAN, PMAY (housing), NFSA and PM Garib Kalyan Anna Yojana, DAY-NRLM (self-help groups), Ayushman Bharat.

Unemployment

• Measurement (PLFS): usual status, current weekly status; unemployment rate around 3–5% (usual status) but high among educated youth; large informal sector.
• Measures: Skill India, Startup India, Make in India, PMEGP, MGNREGA, PLI schemes, Mudra loans.

Inflation

Inflation is a sustained rise in the general price level. Measured in India by CPI (Combined) — RBI's target is 4% ± 2% under flexible inflation targeting (since 2016) — and WPI.

• Demand-pull: excess demand — rising incomes, government spending, credit expansion.
• Cost-push: rising costs — fuel, wages, supply shocks (monsoon failure), rupee depreciation.
• Effects: erodes purchasing power, hurts fixed-income groups and savers, benefits debtors, distorts investment, worsens the balance of payments.
• Control: monetary measures (repo rate, CRR), fiscal measures (lower deficit, tax changes), supply-side (buffer stocks, imports, better supply chains).

Income inequality

• Measured by the Lorenz curve and Gini coefficient (0 = perfect equality, 1 = perfect inequality).
• Causes: concentration of land and assets, inheritance, unequal access to education, regional imbalance, informal jobs, tax evasion.
• Measures: progressive taxation, land reforms, welfare schemes, financial inclusion (Jan Dhan), education and skilling.

Black money

Black money is income on which tax has not been paid or which is earned illegally — kept in cash, real estate, gold, benami holdings or abroad.

• Causes: high taxes (historically), complex regulations, corruption, cash transactions, real estate deals.
• Effects: loss of tax revenue, parallel economy, inequality, inflation, distorted priorities.
• Measures: Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act 2015, Benami Transactions (Prohibition) Amendment Act 2016, demonetisation (November 2016), GST, Aadhaar-PAN linking, limits on cash transactions (Section 269ST — ₹2 lakh), digital payments.