INTRODUCTION

What is economics
We all know that human wants are unlimited but resources are limited. This is also
called "basic economic problem." Wants generate demand and resources generate
supply.

"Economics is the study of how societies use scarce resources to produce

valuable commodities and distribute them among different people.

economics thus addresses the basic economic problem of rational management of

resources or the problem of optimum utilization of resources. This economic
problem poses three important questions 1) what to produce
2) how to produce?
and (3) for whom to produce?

THE TWO BRANCHES OF ECONOMICS:

MICROECONOMICS AND MACROECONOMICS

There are two major branches of economics: Microeconomics and

macroeconomics

Microeconomics studies the behavior of individual entities, households, firms, and

markets.

Macroeconomics examines a wide variety of areas, such as how total investment

and consumption are determined, how central bank manages money and interest
rates, what causes international financial crisis, and why nations grow rapidly
while others stagnate.

ECONOMIC GROWTH AND DEVELOPMENT

Traditionally, economic development has been considered as synonymous with

economic growth. Modern view, however, tries to differentiate between growth
and development.
 1) • Economic growth means a sustained increase in country's output and
measured in terms of gross domestic product or growth per capita. Economic
development on the other hand measures the technological and institutional
change by which increase in output takes place.

2) Economic growth is a short period process and is measured annually ,

economic development on the other hand is a long term process and takes
place over the period of time

NATURE OF INDIAN ECONOMICS

INDIA A LOWER MIDDLE INCOME COUNTRY

The World Bank classifies the world's economies into four income groups-high,
upper-middle, lower-middle, and low. This assignment is based on GNI per capita
which is calculated using the Atlas method.* For the year 2019, low-income
economies are defined as those with a GNI per capita of $995 or less in 2017;
lower middle-income economies are those with a GNI per capita between $996 and
$3,895; upper middle-income economies are those between $3,896 and $12,055;
and high-income economies are those with a GNI per capita of more than $12,055.
Out of 218 countries, there are 34 low-income economies, 47 lower-middle-
income economies, 56 upper-middle-income economies, and 81 high-income
economies. With GNI per capita income of $1820, India is classified as a lower-
middle income country.

THIRD LARGEST AND FASTEST GROWING ECONOMY

At the time of independence, India was a backward nation with very less growth
rate. The government through five-year plans tried to address such problems by
laying down targets and ensured the allocation of funds for the development of
different sectors. Till the first five plans, the average GDP growth was around
3.5%, and as a result, Indian economy failed to take off.
During the post-reform period, the growth rate picked up, especially during 2004-
2008, the country witnessed an average growth rate reaching an unprecedented
high of 8.8% a year. Reaching an aspirational growth rate of 8% or higher and
sustaining such growth momentum requires contributions from all domestic sectors
and support from the global economy. While India's growth has been well
diversified, the pace of growth acceleration has differed across sectors. The
acceleration of value added has been fastest in services, followed by industry, and
there has been no evident pattern of acceleration in agriculture? As per world
economic outlook 2018 report, India is the world's third largest economy in terms
of purchasing power parity (PPP), after the China and the United States. India has
become the sixth largest in terms of nominal GDP surpassing France. India is
forecast to overtake the UK to become the world's fifth largest economy in 2019
and projected to surpass Japan to feature at the second position in the Asia-Pacific
region by 2025.

Higher Population Growth and High Dependency Ratio

World Bank noticed population growth rate of 1.1% in 2017. Population of India
has increased from nearly 38 crore in 1951 to 1.4 billion in 2023 in the most recent
estimated report The country is passing through the third stage of demographic
transition which is characterized by falling birth rate and death rate. Higher
population puts pressure on limited resource base of the country and causing
deprivations to the masses that result into low per capita income of the nation. The
pressure of population has also resulted in higher dependency ratio as well.

IMPORTANCE OF ECONOMIC REVOLUTION

The importance of understanding economic revolutions because they have a

profound impact on both individual lives and national growth
Here are a few points reflecting the importance of understanding economic
revolutions, based on Sandeep Garg’s perspective:

1. Understanding Economic Shifts for Policy Formulation:

an understanding of economic revolutions helps policymakers design effective

policies. Whether it's the Industrial Revolution, the Green Revolution, or the
Digital Revolution, each has required specific policy responses to maximize
benefits and mitigate risks. For instance, the Green Revolution in India, which
revolutionized agricultural productivity, required reforms in land usage, irrigation,
and technology adoption. Policymakers must understand the underlying economic
forces at play to support sustainable growth.

2. Transforming National Economies

Economic revolutions often mark shifts in an economy's structure. For example,

during the Industrial Revolution, countries that adapted quickly, like the United
Kingdom, saw massive economic growth, while others struggled to catch up.
India’s post-independence transformation through its own economic revolutions in
agriculture, industry, and services sectors highlights the importance of adapting to
economic changes to maintain long-term growth.

3. Enhancing Innovation and Competitiveness

An economic revolution often drives innovation. understanding the dynamics of

such revolutions enables countries to stay competitive on the global stage. The
Digital Revolution, which has dramatically reshaped industries from
manufacturing to services, requires a grasp of technological advancements and
their economic implications
4. Socio-Economic Development:

Economic revolutions are often catalysts for socio-economic development. By

understanding the nature of these revolutions, one can predict and manage their
social impact. For example, the Information Technology Revolution not only
transformed the economy but also impacted labor markets, education, and
employment patterns. Garg argues that comprehending these shifts enables
societies to prepare for job displacement, income inequality, and shifts in skill
demands.

PHASES OF INDIAN ECONOMIC GROWTH

Phase 1 [1947-1991]

1. Socialist Economy and State-Led Industrialization

 Socialist Economy: India adopted a mixed economy, where key sectors

were controlled by the state, with an emphasis on self-sufficiency and
industrial growth through central planning.
 State-Led Industrialization: The government set up public sector
enterprises (PSEs) in core industries, aiming to reduce dependence on
foreign capital and promote indigenous industrial development.

Graph: Growth of Public Sector Enterprises in India (1950s-1980s)

Explanation:

 Key Insight: This graph highlights the expansion of public sector

enterprises in India from the 1950s through the 1980s. The growth is
attributed to India's socialist policies and the government's emphasis on
controlling heavy industries like steel, coal, and energy.
 Key Takeaway: This growing dominance of public sector enterprises is
characteristic of India’s state-led industrialization during the early years of
independence.

2. Five-Year Plans and Public Sector Dominance (Pros and Cons)

 Five-Year Plans: Aimed to boost economic growth, with an early focus on

agriculture and infrastructure, followed by industrialization.
 Public Sector Dominance: Under these plans, the public sector was
encouraged to dominate key industries, but the inefficiencies of state-run
enterprises became apparent over time.
Graph: GDP Growth and Public Sector Investment (1950-1990)

 Key Insight: The graph shows the trend of GDP growth alongside public
sector investment. The slow GDP growth during the 1960s and 1970s
correlates with the dominance of public sector enterprises, which, while
large, were often inefficient and lacked competition.
 Key Takeaway: The lack of competition in key industries led to stagnation,
reflected in the relatively slow GDP growth rates in the early years.

Source: Statista - India Public Sector Investment

3. Green Revolution and Agricultural Reforms

 Green Revolution: Aimed at enhancing agricultural productivity through

new technologies like high-yielding varieties of seeds, chemical fertilizers,
and irrigation methods. This revolution primarily impacted food grain
production, especially wheat and rice.
 Agricultural Reforms: These reforms drastically improved agricultural
output, especially in states like Punjab, Haryana, and Uttar Pradesh.

Graph: Agricultural Productivity Increase Post-Green Revolution (1960-

1990)

 Key Insight: The graph demonstrates the sharp increase in agricultural

productivity post-Green Revolution. The introduction of high-yielding seeds
and fertilizers led to an increase in food grain production, particularly wheat
and rice.
 Key Takeaway: The Green Revolution helped India transition from a food-
deficit country to a self-sufficient one, improving food security and rural
incomes.

4. License Raj and Economic Bottlenecks

Written Material:

 License Raj:
 The then Finance Minister Manmohan Singh in PV Narsimha Rao's
Congress Government of 1991, announced India's most radical policy
document in the form of the New Industrial Policy - the Licence Raj was
scrapped on 24 July 1991.
 This was the governments initial step in moving India ahead at the
international level and raise industrial efficiency by accelerating Industrial
growth.
 Licence Raj, which was in place for four decades, came to an end with the
new industrial policy announced by Manmohan Singh and Prime Minister
PV Narsimha Rao, who also held the portfolio of Industries Minister.
 It was in the 1980s and 1990s that the tides began to turn against the
Nehruvian conception of democratic socialism, which influenced the
Licence Raj.
 Nehru, influenced by post revolution Russia, was an avomed socialist
proposed economic plans in India that stressed centralized planning of the
economy. His vision was to modernize Indian economy that was left
 impoverished due to decades of colonial rule. His vision created a hybrid
economy unlike Russia and allowed private enterprise to flourish. It was the
core segments and strategic industries that were placed under state control
and public sector corporations guided investment.
 Over 4 decades, the Licence Raj began to stifle India's growth and Indian
economy was seen to be prevented from reaching its full success On 24 July
1991 the Indian Government under able leadership transitioned to
Liberalisation, with an aim to correct the distortion and weakness in the
industrial structure of India.
 This policy did not suggest total government decontrol and delicensing but
certain radical proposal set the ball rolling to liberaliasation.
 The New Industrial Policy proposed getting rid of Monopolicies and
Restrictive Trade Practices and abolishing industrial licensing for all but 18
industries.
 Foreign equity holdings were proposed to be raised by 51% in a project.
Indian industry was free of controls and bureaucracy like never before.
 A complex system of permits and licenses required for businesses to operate.
It stifled private enterprise, slowed industrial growth, and promoted
inefficiency.

Economic Bottlenecks: The restrictive policies of the License Raj created

severe bottlenecks in production, limited trade, and delayed economic
development.
Graph: Imports and Exports as % of GDP (1960-1990)

 Key Insight: This graph shows how India's imports and exports as a
percentage of GDP were relatively low during the period of the License Raj
(1960s–1980s), reflecting a closed economy due to bureaucratic controls.
 Key Takeaway: The graph highlights how trade was constrained, limiting
India’s exposure to global markets, which hindered its economic growth
during this period.
 PHASE 2 [1991-2000]
Economic Liberalization (1991-2000)

Context:

 In 1991, India faced a severe economic crisis marked by a balance of

payments crisis, rising inflation, and a declining foreign exchange reserve.
To address this, the Indian government, under the leadership of P.V.
Narasimha Rao and Manmohan Singh (then Finance Minister), initiated
sweeping economic reforms.

Key Features of Economic Liberalization (1991-2000): The reforms were driven

by the LPG (Liberalization, Privatization, and Globalization) model:

1. Liberalization:
o Economic deregulation: Removing restrictions on industries, trade,
and business.
o Removal of licensing requirements for many sectors (except a few
strategic industries).
o Devaluation of the Rupee to make exports more competitive and
manage the trade deficit.
o Reduction in tariffs and import quotas to integrate India into the
global market.
2. Privatization:
 o Disinvestment in state-owned enterprises (SOEs) and reducing
government control in key sectors.
o Encouragement of private-sector participation in industries
previously dominated by the government.
3. Globalization:
o Opening up to foreign direct investment (FDI), which was
previously restricted.
o Reduction in import duties and liberalization of foreign trade
policies to integrate India into the global economy.

Pros of Economic Liberalization (1991-2000)

1. High Economic Growth:

o Economic liberalization transformed India's economy, leading to a
sustained growth rate of around 6-7% annually during this period.
2. Increase in Foreign Direct Investment (FDI):
o The removal of restrictions on foreign investment led to significant
FDI inflows, particularly in the technology and automobile sectors.
3. Boost to Exports:
o The liberalization of trade policies encouraged exports, particularly in
sectors like textiles, software services, and pharmaceuticals.
4. Infrastructure Development:
o The inflow of foreign capital and privatization of some state-owned
enterprises led to improvements in infrastructure such as roads, ports,
and telecommunications.
5. Increased Employment Opportunities:
o The expansion of industries, particularly in the IT and manufacturing
sectors, created new employment opportunities for the educated urban
workforce.

Cons of Economic Liberalization (1991-2000)

1. Rising Inequality:
o Although the economy grew, the benefits were unevenly
distributed. The rural areas and poorer sections of society were often
left behind, leading to an increase in income inequality.
2. Loss of Jobs in Public Sector:
 o Many state-owned enterprises were privatized, leading to layoffs and
job losses in the public sector.
3. Agricultural Stagnation:

While industrial and service sectors flourished, agriculture did not benefit
as much from liberalization. Rural areas and small-scale farmers faced
difficulties due to a lack of support and investment

4. Environmental Concerns:
o The rapid industrialization and increased foreign investments
contributed to environmental degradation, with some sectors (such
as manufacturing) leading to pollution and over-exploitation of
resources.

1. GDP Growth Rate (1991-2000)

 Key Insight: The GDP growth rate saw a remarkable improvement following
the 1991 reforms. Before the reforms, India had a relatively low growth rate of
around 3.5% per year. After liberalization, the economy grew at a much higher rate
of 6-7% annually during the second half of the decade.

Takeaway: The reforms, including trade liberalization and opening up of

markets, contributed directly to an economic boom.
2. Foreign Direct Investment (FDI) Inflows

Key Insight: The post-1991 period saw an exponential increase in both exports
and imports. As tariffs were reduced, India's exports surged, particularly in
software and textiles. Imports also grew due to liberalized trade policies and
greater access to foreign goods.

Takeaway: This graph highlights how the liberalization process enabled India to
become more integrated into the global market, driving growth in trade volumes.
 3. Exports and Imports as Percentage of GDP

 Key Insight: The post-1991 period saw an exponential increase in both

exports and imports. As tariffs were reduced, India's exports surged,
particularly in software and textiles. Imports also grew due to liberalized
trade policies and greater access to foreign goods.
 Takeaway: This graph highlights how the liberalization process enabled
India to become more integrated into the global market, driving growth in
trade volumes
4. Income Inequality: Gini Index (1991-2000]

 Key Insight: The Gini Index measures income inequality. A higher Gini
index reflects higher income inequality. The graph shows a rise in the Gini
index during the 1990s, signifying that the gap between the rich and poor
widened in India post-liberalization.

 Takeaway: The economic liberalization led to growth, but the benefits were
disproportionately shared, with urban areas and the educated elite benefitting
the most.
 5. Sector-wise Contribution to GDP (1991-2000]

 Key Insight: The graph illustrates a significant shift in India’s economy

after 1991. The services sector (especially IT, telecom, and finance)
expanded rapidly, while agriculture’s share of GDP began to decline. This
change reflects India’s shift toward a service-driven economy.
 Takeaway: Post-liberalization, India's economy became increasingly driven
by the services sector, with industries like IT and software emerging as key
drivers of growth.

6. Inflation Rate (1991-2000)

 Key Insight: The graph shows the consumer price index (CPI) inflation
rate in India from 1991 to 2000. After liberalization, inflation fluctuated but
remained higher than in the pre-reform period, reflecting the impact of
structural changes in the economy.
 Takeaway: Liberalization led to some inflationary pressures, especially in
the initial years, due to changes in pricing mechanisms, currency
devaluation, and external factors.

END OF LICENCE RAJ

The end of the Licence Raj came in 1991 during a severe economic crisis when
India faced a balance of payments problem and was on the brink of defaulting on
its foreign debt. Under Prime Minister P.V. Narasimha Rao and Finance Minister
Dr. Manmohan Singh, a series of economic reforms were introduced, including:

1. included:
o Deregulation of Industries: The government began to gradually
relax the control over industries, including eliminating the need for
licenses for many sectors. This was a major move away from the
Licence Raj.
o Reduction in Import Duties: The import tariffs were drastically
reduced, making it easier for Indian businesses to source raw
materials and intermediate goods from global markets.
o Privatization of State-Owned Enterprises: Many state-owned
companies were either privatized or allowed to compete in the private
sector, leading to increased competition and efficiency.
o Liberalization of Foreign Investment Policies: The government
opened up the economy to foreign direct investment (FDI), which led
to the inflow of capital, technology, and expertise.

2. Shift Toward a Market-Oriented Economy: The reforms led to a major

shift towards a market-oriented economy. Businesses no longer had to rely
on government licenses to expand or operate. The move towards
deregulation and privatization fostered entrepreneurship, innovation, and
foreign investment.

Economic Impact of Ending the Licence Raj:

1. Increased Economic Growth: The reforms of 1991 unleashed India’s

growth potential. India’s GDP growth rate accelerated significantly, and the
country began to integrate with the global economy. From 1991 to the mid-
2000s, India’s economy grew at an average annual rate of around 6–7%.
2. Rise of the Private Sector: The private sector flourished as many new
industries and businesses emerged. The information technology (IT) sector,
in particular, became a global leader, thanks to the liberalization policies.
3. Improved Global Competitiveness: With less government intervention and
more competition, Indian businesses became more competitive. This not
only helped them to grow but also made Indian exports more attractive to
foreign markets.
4. Challenges and Criticisms: While the end of the Licence Raj brought many
benefits, it also posed new challenges. The rapid pace of liberalization led to
greater income inequality, as the benefits of growth were not equally
 distributed. The privatization process also raised concerns about corporate
monopolies and the exploitation of resources.

GROWTH OF PRIVATE SECTOR AND MARKET ECONOMY

The growth of the private sector and market economy in India between 1991 and
2000 was significantly influenced by the economic liberalization policies initiated
in 1991. Here are the key developments during this period:

Economic Liberalization Initiatives

-Policy Changes: The government abolished the License Raj, which removed
licensing restrictions on most industries, except for a few sensitive sectors. This
encouraged private investment and foreign participation in the economy[1][3].

- Foreign Investment: There was a substantial increase in foreign direct

investment (FDI), from $132 million in 1991-92 to $5.3 billion in 1995-96. This
influx of capital supported various sectors, particularly in technology and
infrastructure[1].

- Market Deregulation: Tariffs were reduced, import restrictions were lifted, and
the private sector was allowed to engage in activities previously reserved for public
enterprises. This shift led to increased competition and efficiency within
industries[3][4].

Impact on Economic Growth

- GDP Growth: The average GDP growth rate rose from 6.9% in the 1981-91
period to approximately 8.1% from 1991 to 2001. This growth was partly
attributed to structural adjustments following liberalization, although some
scholars argue that the immediate effects were less pronounced[2][6].

- Sectoral Performance; The service sector emerged as a significant driver of

growth, with IT and business services growing rapidly. By the late 1990s, the
services sector contributed increasingly to GDP, reflecting shifts towards a more
service-oriented economy[5].

- Poverty Reduction: The reforms contributed to a decline in extreme poverty

rates, from 36% in 1993-94 to about 24.1% by 1999-2000, indicating improved
living standards for many[1].

Challenges and Criticisms

- Income Inequality: While liberalization stimulated growth, it also led to

increased income inequality and disparities between urban and rural areas. Critics
argue that benefits were unevenly distributed, favoring urban centers over rural
populations[1][4].

- Public Sector Decline: Public investment decreased during this period, leading
to concerns about underinvestment in critical sectors such as agriculture, which did
not experience similar growth compared to services and industry[4][6].

In summary, the period from 1991 to 2000 marked a transformative phase for
India's economy, characterized by significant growth in the private sector and
integration into the global market, despite facing challenges related to inequality
and public investment decline.
 PHASE 3 [2000-PRESENT]
INDIAN GDP ANNUAL GROWTH RATE

The Indian GDP expanded 6.2% from the previous year in the December quarter of
2024, picking up from the upwardly revised 5.6% expansion in the earlier period
but slightly below market expectations of a 6.3% growth rate.
The rate consolidated the softening in India’s GDP growth, which was by far the
fastest growing economy in the G20 up until last year, following a prolonged
period of high energy and food prices, in addition to restrictive monetary policy
and tight liquidity conditions by the RBI.

Growth increased for private consumption expenditure (6.9% vs 5.9% in

September quarter) and public expenditures (8.3% vs 3.8%), but slowed for gross
fixed capital formation (5.7% vs 5.8%). In the meantime, net external demand
contributed positively to the GDP as exports soared by 10.4% and imports softened
by 1.1%. source: Ministry of Statistics and Programme Implementation (MOSPI).
BUILDING INDIA - 10 YEARS OF INFRASTRUCTURE DEVELOPMENT

The Government of India has embarked on an ambitious journey to revolutionize

the country's infrastructure landscape, aiming to bolster economic growth, enhance
connectivity, and improve the quality of life for its citizens. With a focus on
modernizing transportation networks, upgrading urban amenities, and expanding
digital infrastructure, the government has launched several transformative
initiatives. From the development of highways, railways, and airports to the
promotion of waterways and ropeway systems, these efforts are aimed at fostering
inclusive and sustainable development across the nation. India has achieved
significant milestones in infrastructure development, including the inauguration of
the world's longest highway tunnel, the Atal Tunnel, and the construction of the
world's highest railway bridge, the Chenab Bridge. Additionally, India has set
records by unveiling iconic landmarks like the Statue of Unity – the world’s tallest
statue and embarked on transformative projects like the Zojila Tunnel, Asia’s
longest tunnel, for all-weather connectivity in Ladakh.[1] Further, from the
architectural excellence of the Atal Setu in Mumbai, Bogibeel Bridge over
Brahmaputra, Jaiswal Bridge and Dhola- Sadiya Bridge in the northeast, the
infrastructure landscape in New India is reaching unprecedented heights.
REVOLUTIONIZING INDIA’S ROADWAYS

Revolutionizing India's roadways entails a comprehensive overhaul of the

country's transportation infrastructure, encompassing modernization, expansion,
and connectivity. Through strategic planning and substantial investments, India is
transforming its road network into a robust and efficient system.
EXPANDING NATIONAL HIGHWAY NETWORK

The progress of national highways in India has been remarkable in the last 10
years, reflecting a significant increase in budget allocation and construction pace.
Since 2014, there has been a 500% increase in the road transport and highway
budget allocation, leading to a substantial enhancement in infrastructure
development. The speed of highway construction reached an impressive 37 km/day
in 2020-21, marking a record for the fastest highway construction in India.

Moreover, the National Highway (NH) network has expanded by 60% from 91,287
km in 2014 to 1,46,145 km by the year 2023. The length of 4-laned NH has
increased by 2.5 times, from 18,387 km in 2014 to 46,179 km, as of November
2023. The average pace of NH construction has also seen a remarkable increase,
rising by 143% to 28.3 km/day from the baseline 12.1 km/day in 2014.

With a comprehensive network spanning 1,46,145 km, national highways play a

crucial role in connecting regions and spurring economic growth across the
country, complementing the extensive state highways spanning 1,79,535 km and
other road infrastructure spanning 65,45,403 km.[2]

TRANSFORMING RURAL CONNECTIVITY THROUGH PMGSY

India has witnessed significant progress in rural road infrastructure, with an

impressive 3.74 lakh km of roads constructed since 2014 under the Pradhan Mantri
Gram Sadak Yojana (PMGSY). This achievement has resulted in over 99% of rural
habitations being connected, demonstrating the government's commitment to
enhancing accessibility and connectivity in rural areas. As of now, a staggering
7.55 lakh km of rural roads have been completed as compared to 3.81 lakh km of
roads in 2013-14.

BHARATMALA: EXTENSIVE ROAD INFRASTRUCTURE

DEVELOPMENT

The Bharatmala Pariyojana was launched with the primary focus on optimizing the
efficiency of the movement of goods and people across the country. The key
components of the Pariyojana are Economic corridor development, Inter-corridor
and feeder routes development, National Corridors Efficiency Improvement,
Border, and International Connectivity Roads, Coastal and Port Connectivity
Roads and Expressways. 25 Greenfield high-speed corridors have been envisaged
for development under Bharatmala Pariyojana. Out of which, 20 are completed or
under various stages of implementation.[3] 34,800 km of National Highway length
was planned for development under Phase-I of Bharatmala Pariyojana. As of Dec-
2023, 26,418 km (i.e., 76% of 34,800 km) have been awarded for construction with
completion of about 15,549 km.[4]

ADVANCEMENTS IN INDIA'S RAIL NETWORK

India's railway development reflects a remarkable stride towards modernization

and improved connectivity, showcasing the Government's commitment to
enhancing transportation infrastructure for the nation's progress.

MODERNIZING RAIL TRAVEL THROUGH VANDE BHARAT TRAINS

The Vande Bharat trains represent a significant advancement in India's railway

infrastructure, boasting enhanced safety features, faster acceleration, and improved
passenger amenities. Equipped with Automatic Plug Doors, Reclining Ergonomic
Seats, and Mobile charging sockets for every seat, these trains offer a comfortable
and convenient travel experience. As of January 31, 2024, more than 100 Vande
Bharat train services are operational across the Indian Railways[5], with an
impressive overall occupancy rate of 96.62% during 2022-23.[6]

Further, on March 12, 2024, Prime Minister flagged off 10 new Vande Bharat
trains. During his address, he informed that that not only most of the states have
got Vande Bharat trains but the century of Vande Bharat Trains has also been hit.
[7]

REVAMPING INDIA’S RAILWAY STATIONS

The Amrit Bharat Station Scheme has been launched for the development and
modernisation of Railway stations in India. This scheme envisages the
development of stations on a continuous basis with a long-term approach. The
scheme has seen significant progress with 1318 stations selected for
redevelopment.[8]

ELECTRIFYING INDIA’S RAILWAYS

With a vision of providing eco-friendly, faster, and energy-efficient mode of

transportation, Indian Railways is marching ahead towards 100% electrification of
Broad-Gauge tracks. Total Broad Gauge (BG) network of 61,508 Route Kms have
been electrified up to December 2023 which is 93.83 % of the total Broad-Gauge
route (65,556 RKMs) of Indian Railways.[9] Until 2014, 21,801 KM of the broad-
gauge network was electrified.[10]
INDIA’S METRO RAIL EXPANSION

The expansion of India's Metro Rail system has revolutionized urban commuting,
with the network set to increase from 248 km in 2014 to an impressive 945 km by
2024. This significant growth reflects the vital role of Metro Rail in providing ease
of transportation to urban populations, with approximately 1 crore passengers
benefiting from the system daily. From just 5 cities in 2014, the Metro Rail
network has expanded to serve 21 cities across the country, with 919 km of lines
under construction in 26 additional cities. Additionally, the introduction of India's
first State of Art Namo Bharat train, operating on the Delhi-Meerut RRTS
(Regional Rapid Transit System) corridor, further underscores the nation's
commitment to enhancing regional connectivity and modernizing its transportation
infrastructure.[11]

Urbanisation
Urbanisation is both a driver and a result of economic development. Many
economic and social activities thrive in these densely populated areas, with some
inherently requiring the agglomeration of individuals and businesses to function
effectively. The world has become increasingly urbanised, with over 50% of the
global population living in urban areas by 2007. This represents a remarkable shift
from 2% in 1800 to 15% by 1900, when there were only 250 million urban
residents globally—just over half of India’s urban population today. By the turn of
the millennium in 2000, the global urban population had surged to 2.9 billion, an
increase of 2.1 billion in just 50 years. Projections indicate that by 2030, nearly
five billion people will live in urban areas, with 55% of this growth occurring in
Asia. India alone is expected to contribute 300 million to this expansion,
accounting for a quarter of Asia’s total increase.

India’s experience has been atypical, at just 35-36%, its urbanisation has
progressed at a much slower pace. However, urbanisation in India rose from 11%
in 1900 to about 28% by the end of the 20th century, while globally, urbanisation
increased from 15% to nearly 50% over the same period. According to various
projections, the Indian urban level should have reached 31% to 31.5% by 2001;
however, the actual levels were far lower, only crossing the 31% mark a decade
later in 2011. Although the rate of growth is still slow, the accretion to the Indian
urban population in the first 30 years of this century—about 300 million—will
surpass that of the whole previous one hundred years. This illustrates the
magnitude of the problems that we need to face in terms of our policies related to
urban development. This paper explores the reasons behind India’s slow
urbanisation and its broader implications for economic growth, governance, and
sustainable development. It also outlines critical policy actions needed to address
these challenges.

The graphic displays the steady growth of India ́s urban and rural population
starting in 1950. Around 2030, for the first time, the rural population declines
while the urban population continues to rise rapidly.
In 2018 a large number of India’s cities have a population between 300,000 and 1
million inhabitants. There are 120 medium-sized cities of such population size, and
only five urban settlements with 20 million or more inhabitants.

In 2025, the degree of urbanization worldwide was at 58 percent. North America as

well as Latin America and the Caribbean were the regions with the highest level of
urbanization, with over four-fifths of the population residing in urban areas. The
degree of urbanization defines the share of the population living in areas that are
defined as "cities". On the other hand, less than half of Africa's population lives in
urban settlements. Globally, China accounts for over one-quarter of the built-up
areas of more than 500,000 inhabitants. The definition of a city differs across
various world regions - some countries count settlements with 100 houses or more
as urban, while others only include the capital of a country or provincial capitals in
their count.

Largest agglomerations worldwide

Though North America is the most urbanized continent, no U.S. city was among
the top ten urban agglomerations worldwide in 2023. Tokyo-Yokohama in Japan
was the largest urban area in the world that year, with 37.7 million inhabitants.
New York ranked 13th, with 21.4 million inhabitants. Eight of the 10 most
populous cities are located in Asia.

Connectivity
It may be hard to imagine how the reality will look in 2050, with 70 percent of the
global population living in cities, but some statistics illustrate the ways urban
living differs from suburban and rural living. American urbanites may lead more
“connected” (i.e. internet-connected) lives than their rural and/or suburban
counterparts. As of 2021, around 89 percent of people living in urban areas owned
a smartphone. Internet usage was also higher in cities than in rural areas. On the
other hand, rural areas always have, and always will attract those who want to
escape the rush of the city.

CHARACTERISTICS OF INDIAN ECONOMY

Mixed Economy
A mixed economy is an economic system in which the public sector (government-
run enterprises) and private sector (privately run businesses) both exist and serve
the economy. The model tries to merge the advantages of the capitalist and
socialist systems to bring about a balance between economic growth, social well-
being, and fair distribution of resources. In a mixed economy, the government has
a critical role to play in regulating and controlling some part of the economy, while
the private sector deals with the market forces such as production, pricing, and
competition.

Public Sector

The public sector within a mixed economy is mostly controlled by the government
and comprises industries, services, and organizations owned and managed by the
state. The goals of the public sector are usually:

1. Public welfare – Providing well-being to the citizens.

2. Strategic importance – Controlling strategic resources such as defense, energy,

and communications.

3. Reducing inequalities – Distributing wealth to all citizens.

 4. Regulation – Regulating sectors that need heavy regulation to ensure public
safety or sustainability. Examples are state-owned enterprises such as Indian
Railways, BSNL, ONGC, and Air India.

Private Sector

Private sector consists of businesses and industries owned and run by private
organizations or individuals. The sector is governed by profit-making and
competition. The role of government in running private firms is generally minimal,
with a focus on policies and regulations. The private sector helps in economic
development through the introduction of innovation, job creation, and the supply of
goods and services effectively.

Examples of private sector firms are Reliance Industries, Tata Group, and Infosys.
Role of the Government in a Mixed Economy

The role of the government in a mixed economy is:

 1. Regulation and supervision: Providing for fair competition, protection of
consumers, and environmental protection.

2. Supply of public goods: Such as healthcare, education, and national defense.

3. Intervention in market failures: Remedying imbalances such as monopolies or

undue externalities.

4. Redistribution of wealth: By social welfare programs, progressive taxation, and

public spending to narrow equality.

Indian Economy 2025: Key Sectors, Characteristics, Features

Key Sectors Contributing to Indian Economy

With the liberalisation of the Indian economy in 1991, it has seen remarkable
changes. The key economic sectors driving India's growth are:

 Agricultural sector: Agricultural sector is the backbone of the Indian

economy and is forecasted to grow by 3.8% in FY25 as per the Economic
Survey 2025. Although its share in the GDP is declining, 50% of the Indian
population is dependent on that. Focusing on the development of the
agricultural sector, the government has undertaken a slew of initiatives such as
subsidies, self-help groups like Lijjat Papad, and cooperative farming models
like e-Choupal. Apart from this, the industry has been gradually shifting
towards cash crops and promising industries like food processing are
emerging.

 Industry sector: After the liberalisation reforms, the industrial sector has
seen a surge in growth and is expected to grow by 6.2% in FY25. This is
because of the encouragement of private investments including FDI, and the
end of bureaucratic hurdles. Industries have seen growth, there is more
autonomy and integration of modern technologies. Joint ventures and
partnerships between private and public sectors are growing and diversifying
the industrial landscape.

 Services sector: In the Indian economy, the services sector has grown
monumentally and constitutes 60% of the GDP. IT services, finance, banking,
and business process outsourcing are the major contributors here. Local IT
 giants such as TCS, Infosys have gained global recognition and contribute
significantly to the Indian GDP. This sector is also contributing to the
demographic dividend of India by creating numerous job opportunities and
will be the primary growth driver, at 7.2%, with intense activity in financial
services, real estate, professional services, and public administration.

 Food processing: Food processing is a lucrative sector due to the

availability of abundant resources, large consumer base and favourable policies
such as Make in India. There is a need for packages and pre-processed food
due to the increasing urbanisation, large population, and disposable incomes.
Since India is the second-largest producer of food grains, we have a huge
potential for growth and investment in this sector.

 Manufacturing sector: After services sector, the manufacturing sector is

the second-largest contributor to GDP. Government has undertaken initiatives
such as Make in India, Sagarmala, Startup India, and Dedicated Freight
Corridors, alongside enthusiastic state participation, to boost the share of the
manufacturing sector in the coming years.

Characteristics of Indian Economy

Now that the key sectors has been explored, let’s look at the key characteristics of
Indian economy:
 High dependence on agriculture: Despite significant growth in the
industrial and services sectors, agriculture remains a crucial part of the
Characteristics of Indian Economy. About 58% of our nation's population is
involved in agriculture. It plays an important role in providing jobs and
supporting many families. To make agriculture more productive and efficient,
the government must focus on using better technology and strategic planning.

 Rapid Service Sector Growth: The service sector has emerged as one of
the key contributors to the Characteristics of Indian Economy. Over the past
few decades, India has seen exponential growth in services such as IT,
healthcare, and financial services. Cities like Bengaluru, Hyderabad, and Pune
are now considered hubs of global outsourcing, making India a critical player
in the global service economy. This growth has been a significant driver of
India's economic development and has helped in creating millions of jobs in
urban areas.

Industrial and Manufacturing Potential: The industrial and

manufacturing sectors are also vital components of the Characteristics of
Indian Economy. The government’s push for initiatives like “Make in India”
aims to boost manufacturing and make India a global manufacturing hub.
Sectors like automobiles, textiles, and chemicals contribute substantially to the
country’s GDP. However, there are challenges such as outdated infrastructure
and insufficient skilled labor that need to be addressed for these sectors to
reach their full potential.

 Dependence on Foreign Trade: India's dependence on foreign trade is an

important part of the Characteristics of Indian Economy. India is one of the
largest importers and exporters globally, with key trading partners such as the
United States, China, and the European Union. While India has experienced
robust export growth in sectors like IT, pharmaceuticals, and textiles, it
remains heavily dependent on imports for crude oil, gold, and technology.

 Challenges of Poverty and : challenges in terms of poverty and

unemployment, which are critical Characteristics of Indian Economy. While
the poverty rate has decreased over the years, millions of people still live
below the poverty line, particularly in rural areas. Unemployment, especially
among the youth, remains a concern, as the country’s education system and
skills development programs are often not aligned with industry requirements.

 Financial Market Development: The development of India’s financial

markets is another key feature of the Characteristics of Indian Economy. India
has a robust banking system, with both public and private sector banks playing
a significant role in the financial ecosystem. The Indian stock market,
consisting of platforms like the Bombay Stock Exchange (BSE) and the
National Stock Exchange (NSE), has seen tremendous growth in recent years.
The liberalization of the financial markets has attracted foreign investors and
strengthened the economy.

 Increasing per capita income: Per capita income is an estimate of the

amount of money earned per person in a country or geographic area. The per
capita income of India has doubled from INR 86,647 for 2014-15 to INR
1,72,000 for 2022-23.

 Expanding workforce: India has a relatively young workforce with a

growing number of people who are ready to work. In both rural and urban
areas, efforts are underway to create more jobs and to make the most of the
available workforce.
 Informal Economy: A unique characteristic of the Indian Economy is the
large informal sector, which includes small businesses, street vendors, and
daily wage workers. A significant portion of India’s labor force works in the
informal economy, which operates outside the formal taxation system. This
sector plays an important role in providing employment but also faces
challenges such as lack of social security, irregular wages, and limited access
to finance and markets.

 Improving infrastructure: In India, the government is working towards

improving the critical infrastructure such as transport, banking,
communications, health, education etc. to fully utilise the country’s resources
and support the overall economic growth.

The Characteristics of Indian Economy is a mix of strengths and

challenges. From its reliance on agriculture to the rapid growth of
services and industry, India’s economy presents a diverse and dynamic
landscape. However, for continued growth and prosperity, India must
address its challenges, including poverty, unemployment, and
infrastructure limitations. By leveraging its young workforce, improving
the ease of doing business, and fostering sustainable development, India
has the potential to become a global economic leader in the near future.

Impact of Covid 19 on the Indian economy

Along with the loss of life that the covid pandemic has caused all over the
world, because of the covid-19 economy of various nations has also taken
a great hit. Almost all sectors of the Indian economy have experienced the
adverse impact of covid -19. According to the ministry of Statics in India,
in the fiscal year 2020, the GDP or the Gross Domestic Product of India
went down to 3.1 %.
In the fiscal year of 2021, during the second quarter, the largest GDP
contraction of about 24% shook the Indian economy. Major Indian
industries like the Ultratech cement, Tata motors, Aditya Birla group either
significantly reduced their operations or shut down temporarily.
A lot of small scale industries too had to be shut down because of the
nationwide lockdown and curfew. This impacted the various sectors of the
Indian economy greatly.
Along with all this, the government had to supply free vaccinations to
everyone in the country in two rounds. All this money came from the
government’s budget. So, the income of the government had significantly
lowered, but the government had to take on such excess expenditures.
 The entertainment industries like the movie theatre, tourism, etc., had to be
completely shut down, and no revenue was generated from them—all this
the Indian economy to a great extent.

KEY CHALLENGES IN THE INDIAN ECONOMY TODAY

What is Fiscal deficit ?

A fiscal deficit is defined as the discrepancy between a government's revenue and

its expenditures over a designated timeframe, usually a fiscal year. When a
government experiences a fiscal deficit, it signifies that its spending outstrips its
income. This condition emerges when the total expenditures of the government
exceed the revenue collected from taxes and other financial sources. It serves as a
vital measure of a nation's economic stability and highlights the disparity between
governmental income and outlays.

A fiscal deficit necessitates that a government borrows funds to fulfill its financial
commitments, typically sourced from both domestic and international lenders. The
presence of a fiscal deficit can have profound effects on the overall economy.

Fiscal deficit and the economy

Fiscal deficit has a direct impact on a country's growth, price stability and inflation.
When an economy is in a slowdown or recession, governments tend to run a higher
deficit to counter the negative impact of slowdown in private demand.

Higher government spending, by keeping the public investment high, has the
potential to push up overall demand in the economy.

However, if the timing and size of deficit isn’t kept under watch it could create
inflation by raising the cost of inputs like labour, raw material.Further, when
government borrows from the market it leaves a lesser share for the private sector
to finance their investment plans. This phenomenon is called ‘crowding out’ effect.
It tends to drive up interest rates.
However, when fiscal deficit is used for investments (building physical or social
infrastructure) it creates long term assets in the economy and helps generate
additional income for the poorer sections which in turn helps in reviving demand.

Further, when government borrows from the market it leaves a lesser share for the
private sector to finance their investment plans. This phenomenon is called
‘crowding out’ effect. It tends to drive up interest rates.

Fiscal Responsibility and Budget Management (FRBM) Act

Enacted in 2003, the FRBM Act sets targets for the government to bring down
fiscal deficit. It requires the government to limit fiscal deficit to 3 per cent of gross
domestic product (GDP) by March 31, 2021 and central government debt to 40 per
cent of GDP by 2024-25.

However, the Act allows invoking of an escape clause in situations of calamity and
national security. In such situations, the government can deviate from its annual
fiscal deficit target.
In her Budget speech last year, Sitharaman had invoked the escape clause and
taken a 0.5 per cent deviation. The fiscal deficit target for FY20 was revised to 3.8
per cent, while pegged the target for FY21 at 3.5 per cent.

How Covid impacted India's fiscal situation

The Union Budget for 2020-21, presented before the Covid-19 ravaged the
economy, had provided for a counter-cyclical fiscal support to the slowing
economy.

As a result, the fiscal consolidation goal of achieving a gross fiscal deficit to GDP
ratio of 3 per cent in 2020-21 was shifted to 2022-23 (3.1 per cent).

Shortfall in government revenue

The shortfall in Centre's revenue collection owing to the interruption in economic

activity and the additional expenditure requirements to mitigate the fallout of the
pandemic on vulnerable sections, created immense pressure on the fiscal resources.
According to the Economic Survey 2021, the government may register a fiscal
slippage in 2020-21 due to revenue shortfall and demand for higher expenditure.

The capital expenditure during April to December 2020 stood at Rs 3.17 lakh
crore, 24 per cent higher than the capital expenditure during the corresponding
period in the previous year.

An analysis of the monthly expenditure also shows that the total expenditure y
registered an increase during the last three months of the year 2020 October,48.3
percent in November and 50.2 per cent in December compared to the same months
in the previous year.

Capital expenditure during the last three months of the year 2020 recorded a
phenomenal growth of 129.5 per cent in October, 248.5 per cent in November and
81.9 per cent in December as compared to same months in previous year, the
survey noted.

According to CGA data, the centre's total expenditure stood at Rs 22.80 lakh crore
or 75 per cent of corresponding BE 2020-21 in December 2020. Out of this, Rs
19,71,173 crore was on revenue account and Rs 3,08,974 crore was on capital
account.

Of the total revenue expenditure, Rs 4,72,171 crore was towards interest payments
and Rs 2,27,352 crore is on account of major subsidies.

In comparison, total receipts till December 2020 works out to be 49.9 per cent of
the BE.
Fall in tax collections

One of the major reasons for India's stretched fiscal position has been its low tax
collections.

The tax revenue collection was 42.1 per cent of BE of 2020-21, compared to 45.5
per cent of BE (2019-20) during the corresponding period a year ago.
Non-tax revenue was 32.3 per cent of BE. During the corresponding period of the
last fiscal, it was 74.3 per cent of BE 2019-20.

SBI report pegged FY21 fiscal deficit at 7.4% of GDP

A report released by State Bank of India (SBI) research pegged the Centre's fiscal
deficit for FY21 to be at 7.4 per cent of GDP. While, it pegged the combined fiscal
deficit of the Centre and states at 12.1 per cent of GDP.

It said that the current trends in GDP for FY21 will translate into Rs 3.2 lakh crore
net revenue shortfall for the Centre. Similarly, expenditure will be higher by
around Rs 3.3 lakh crore. Thus, the fiscal deficit will be around Rs 14.46 lakh
crore.
Inflation Management in India

Management of inflation in India is very important to maintain economic stability

and achieve sustainable growth. The central bank of India, the Reserve Bank of
India (RBI), is instrumental in inflation management through monetary policy.
India experienced high inflation during the 1970s and early 1990s, as well as
relatively low inflation in the recent past.

Principal Means of Inflation Management in India

1. Monetary Policy:

• Repo Rate and Reverse Repo Rate: The RBI employs the repo rate
(commercial banks' rate of borrowing from the RBI) and the reverse repo rate (the
rate at which the RBI borrows from commercial banks) to control liquidity in the
economy. During inflation, the RBI raises the repo rate to decrease money supply
and borrowing, lowering demand.
• Cash Reserve Ratio (CRR): The RBI can vary the CRR, which is the
proportion of a bank's total deposits that it has to keep as reserves. A rise in the
CRR decreases the money available for lending and hence regulates inflationary
pressures.

• Open Market Operations (OMO): The RBI sells or purchases

government securities in the open market to manage the money supply. Selling of
securities sucks in excess money, thereby checking inflation.

• Inflation Targeting: India has implemented an inflation targeting

model since 2016, where the objective is to maintain inflation between a range of
2% to 6%. The RBI seeks to aim Consumer Price Index (CPI) inflation at this
band.

2. Fiscal Policy:

• Government Expenditure and Taxation: The government of India is

also responsible for managing inflation via fiscal measures such as altering
expenditure and taxation levels. For example, raising taxes can lower the
disposable income and consequently lower inflationary pressures.

• Subsidies and Price Regulation: The Indian government

occasionally offers subsidies on staple items (such as food and fuel) to manage
price inflation, but this can be costly and result in fiscal imbalances.

3. Supply-Side Measures

•Enhancing Agricultural Productivity: Since food inflation is a major driver of

overall inflation in India, enhancing agricultural productivity can stabilize prices.
Policies to curb food wastage, enhance supply chains, and increase agricultural
production are important in this context.

•Less Dependence on Imports: Encouraging local production of necessary

items, such as food and energy, will help India lower its reliance on imports, which
are prone to price fluctuations at the international level. For instance, price
uncertainty in international crude oil markets can have a serious impact on Indian
inflation.

4.Management of Exchange Rate:

• Currency Stabilization: RBI influences the foreign exchange market to avoid
undue devaluation of the Indian Rupee, which may cause imported inflation.
Weakening of the rupee increases the price of imports, most importantly oil, a top
driver of inflation in India.

1. Post-1991 Economic Reforms: India had suffered from inflation and

economic turbulence during the early 1990s. India pursued significant economic
reforms after the 1991 balance of payments crisis, including financial sector
reform, fiscal deficit reduction, and trade liberalization. These efforts stabilised
inflation in the longer term.

2. Global Inflationary Pressures (2007-2008): After the global financial

crisis, India experienced inflation driven by record-high global oil and food prices.
The RBI reacted by raising interest rates and employing other monetary measures
to contain inflation.

3. Recent Inflation (2020s): In recent years, India has faced inflationary

pressures due to factors like global supply chain disruptions, rising oil prices, and
food price volatility. The COVID-19 pandemic also contributed to supply-side
constraints and demand-side disruptions. The RBI’s monetary policy stance has
remained focused on controlling inflation while ensuring economic growth.

Challenges in Inflation Control in India

1. Food Inflation: Food prices, especially those of vegetables, pulses, and cereals,
are extremely volatile in India and are a major contributor to overall inflation.
Supply chains of agricultural products in India tend to be inefficient, resulting in
price volatility.

2. Global External Factors: Global factors, particularly the prices of crude oil,
have a strong influence on Indian inflation. Being an oil-importing country, an
increase in international oil prices has the potential to cause inflationary pressures.

3. Structural Problems: Structural problems like supply chain inefficiencies,

trade barriers, and labor market inefficiencies too can drive inflation. India's large
size and regional price disparities also complicate the management of inflation.
Graphs and Data

1. Inflation Trends in India (CPI Inflation):

•A chart of the recent decades' India's Consumer Price Index (CPI) inflation trends
would have peaks in inflation during the 1970s and the 1990s, then pretty low
inflation with some bursts with external influences like food price rise or oil price
rise.

2.Repo Rate and Inflation

• A graph showing the Repo Rate against inflation in India would illustrate the
RBI’s response to inflationary pressures by adjusting the repo rate to either
stimulate or cool down the economy.

Infrastructure and Urbanization Problems in India

India, being a rapidly growing economy, has some very major issues concerning
infrastructure and urbanization. The fast rate of urbanization, coupled with
insufficient infrastructure, poses opportunities as well as challenges for sustainable
development. Given below is an overview of the most important infrastructure and
urbanization problems in India, together with their implications.

Infrastructure Problems in India

1. Poor Transportation Infrastructure

• Roads: India has made a notable improvement in roads, but most rural
regions remain without proper connectivity. Overcrowding in cities and poor
maintenance of roads are persistent problems.

• Railways: India has one of the world's largest railway networks, but it
suffers from being overcrowded, obsolete technology, and safety concerns.

• Airports and Ports: While metropolitan areas like Delhi and Mumbai have
modern airports, there is an overall shortage of capacity and regional airports still
struggle to cope with growing demand. Similarly, ports like Mumbai’s Jawaharlal
Nehru Port face congestion, slowing trade and economic activity.

2. Power Supply and Distribution

•Power Shortages: Though India has achieved considerable progress in enhancing

power generation capacity, the problem of power distribution and outages,
particularly in rural India, still exists.

2.Renewable Energy: Transitioning to renewable energy is a high priority, but

India's infrastructure for renewable energy production, like wind and solar, remains
in its infancy.

3.Water and Sanitation

• Water Supply: Water scarcity is a problem in most urban and rural regions.
Moreover, water pollution is also a key issue, particularly in urban lakes and rivers.

• Sanitation Facilities: Insufficient sanitation facilities are a problem in India,

resulting in unhygienic conditions and illness. The government's Swachh Bharat
(Clean India) campaign tries to mitigate these problems, but rural and informal
urban settlements present challenges.

4. Waste Management
•Solid Waste: Urbanization at a high rate has resulted in increased waste
generation. Most cities are not able to handle the waste effectively, and landfills
are filled up.
Plastic Pollution: Although people are getting more aware of plastic waste, plastic
pollution is still an issue.

Urbanization Problems in India

1.Urbanization at a High Rate

•Urban Population Boom: India's urban population is expanding tremendously.

More than 600 million Indians are anticipated to reside in cities by the year 2031,
as projected by the United Nations. This exerts tremendous pressure on
infrastructure and services available.

Urban Sprawl: Delhi, Mumbai, and Bangalore are all witnessing unregulated
expansion, giving rise to the proliferation of informal settlements (slums), and
uncontrolled planning in urban development.

2.Shortage of Housing and Slums

• Affordable Housing: There exists a massive imbalance in the supply and

demand for affordable housing within cities. There are millions of residents in
slums or unsatisfactory dwelling conditions, which are devoid of minimum
amenities such as water, sanitation, and electricity.

• Real Estate Challenges: The real estate market has expanded with
high velocity, but due to speculative pricing and land acquisition issues, the
housing has been rendered unaffordable for most segments of urban residents.

3. Traffic Congestion and Pollution

• Traffic Congestion: Indian cities are beset by traffic congestion. The absence of
adequate public transport, coupled with high vehicle growth, results in daily
congestion, lowering productivity and raising stress levels among commuters.

• Air Pollution: Cities such as Delhi are afflicted by high air pollution, causing
health issues and environmental degradation. The rise in vehicular emissions,
industrialization, and construction activities is responsible for this problem.

4. Inadequate Healthcare and Education Facilities

•Overloaded Healthcare System: Urban areas, even with a higher number of
hospitals and health centers, lack healthcare professionals, infrastructure, and
medical facilities, causing hospital overcrowding.

•Educational Infrastructure: Although more educational opportunities are available

in urban areas, there is a gap between demand and supply. Public schools and
universities tend to be overcrowded, and the standard of education is inconsistent.

5.Inadequate Green Spaces and Social Infrastructure

• Reducing Green Spaces: Urbanization leads to a decrease in green cover, parks,

and natural belts in urban cities. It diminishes the quality of life and adds to
environmental stress.

• Social Infrastructure: As the urban population expands in a swift manner, key

social infrastructure like recreation centers, sport complexes, and community
centers remain behind in the demand.

Photos Illustrating Urbanization and Infrastructure Concerns in

India
1. Urban Traffic Jam

This is the kind of heavy traffic characteristic of most Indian major cities,
especially during peak hours. It is an indication of the congestion experienced by
commuters and the strain on existing road infrastructure.

2. Slum Housing in Mumbai

This picture shows the Dharavi slum in Mumbai, which is one of India's largest
informal settlements. With the fast urbanization of Mumbai, however, most
individuals continue living in crowded and unhygienic conditions, which points to
the shortage of housing.
3. Air Pollution in Delhi

This photo illustrates the extreme air pollution in Delhi. In some months, the air in
Delhi becomes even more polluted to dangerous levels, greatly impacting public
health and quality of life.

4. Bengaluru Solid Waste Management

The above picture reflects a problem of improper disposal of waste in urban

centers. With the fast expansion of waste generation as a consequence of
urbanization, urban settlements such as Bengaluru struggle to manage waste
optimally, which leads to choked drains and pollution of the environment.

GOVERNMENT POLICIES AND REFORMS

1. The Early Years (1947–1950s): Focus on Self-Reliance and Import
Substitution
Policy Focus: After independence, India adopted a mixed economic model with an
emphasis on self-reliance. The government believed that the country needed to
build its own industrial base to reduce dependency on foreign countries.

Key Features of this are

Planning Commission: The establishment of the Planning Commission in 1950
marked the start of central planning.

Five-Year Plans: The first five-year plan (1951-1956) focused on agriculture,

irrigation, and power generation.

Industrial Policy Resolution (1956): This marked the beginning of import

substitution, focusing on developing domestic industries by restricting imports.

Public Sector Dominance: State-led industrialization, with the government taking

control of key sectors like steel, coal, and transport.
2. The Green Revolution and Economic Expansion (1960s–1970s)
Policy Focus: In the 1960s, India was facing food shortages, and the government
pushed for agricultural reforms under the Green Revolution.
Key Features of this are
Green Revolution: Introduction of high-yielding variety seeds, increased use of
fertilizers, and mechanized farming led to a significant increase in food grain
production.

Industrial Growth: The focus remained on heavy industries and public sector
enterprises.

Import Substitution Continued: While there was some shift to a more diversified
industrial policy, the general theme of import substitution remained.

3. Economic Crisis and Liberalization (1980s–1990s)

Policy Focus: The 1980s saw some economic reforms and liberalization, but the
real shift occurred in the 1990s when India faced a balance of payments crisis.

BOP - it occurs when a country’s BOP which is the records of its transactions with
the rest of the world becomes unsustainable

Key Features of this are

Structural Reforms (1991): Faced with a fiscal crisis (it occurs when a
governments revenue is insufficient to cover its expenditures , leading to a
significant increase in debt and potentially threatening the country’s economic
stability.

India undertook major economic reforms, including:

Liberalization of Trade: Reduction of tariffs and import licensing.

Privatization and Disinvestment: The government started divesting its stake in
several public sector enterprises.

Exchange Rate Reforms: The move from a fixed exchange rate to a market-
determined exchange rate.

Opening Up to Foreign Investment: Relaxing restrictions on foreign direct

investment (FDI) (it occurs when an individual,business, or govt from one country
invests in a business or establishes operations in another country

4. Post-Liberalization Growth and Challenges (2000s)

Policy Focus: Post-1991, India experienced rapid economic growth, driven by
information technology (IT), services, and globalization.
Key Features:
Services Sector Growth: The IT and software services sector expanded
dramatically, becoming a key driver of growth.

Continued Economic Growth: India averaged growth rates of 6-8% annually

during the 2000s.

Focus on Infrastructure: Policies like the National Infrastructure Pipeline aimed to

boost infrastructure development.

Government policies

The government policies from the 2010s to the present in India have been diverse,
aiming at economic reforms, social welfare, infrastructure development, and
technological growth. Various policy frameworks have been introduced in this
period to address challenges like poverty, unemployment, inflation, and fiscal
deficit, while promoting economic growth and sustainability
1. Goods and Services Tax (GST) - 2017

Introduced in 2017, GST was a landmark reform aimed at unifying the indirect tax
structure across India. The policy subsumed multiple taxes like VAT, service tax,
and excise duty into a single tax, reducing the cascading effect of taxes on goods
and services.

According to Madhur M. Mahajan and Sandeep Garg, GST is a significant step

toward simplifying the tax structure in India, improving compliance, and fostering
ease of doing business. It also helps in widening the tax base, which is crucial for
fiscal consolidation in the country. However, the transition to GST was initially
challenging, with issues regarding implementation and the complexity of tax slabs.

2. Make in India - 2014

Policy Overview: Launched by Prime Minister Narendra Modi in 2014, the "Make
in India" initiative aimed at transforming India into a global manufacturing hub. It
encouraged both domestic and foreign companies to manufacture in India by
simplifying regulations, improving infrastructure, and offering various incentives.

"Make in India" was essential to India's long-term economic growth. It was seen as
a policy that not only sought to create jobs but also aimed at improving India's
industrial capacity and technological development. However, its success was
contingent on sustained infrastructural investments and reforms in labor laws,
which were still in the process of being reformed during the early years of the
initiative.
3. Digital India - 2015
Policy Overview: The Digital India initiative, launched in 2015, aimed to enhance
the online infrastructure and increase Internet connectivity across the country. This
policy also emphasized the promotion of digital literacy, government services
online, and the digital empowerment of citizens.

Digital India is a forward-looking policy with the potential to drive inclusive

growth. They emphasized that digital transformation would lead to better
governance, financial inclusion, and enhanced delivery of public services.
However, challenges like the digital divide and the need for greater internet
penetration in rural areas were also highlighted.

4. Demonetization - 2016
Policy Overview: In November 2016, the Indian government demonetized INR
500 and INR 1,000 currency notes to tackle black money, counterfeit currency, and
corruption. The policy aimed at pushing the economy towards a digital payment
system and increasing tax compliance.

while acknowledging the short-term disruptions caused by demonetization, argued

that it had the potential to lead to long-term benefits in terms of formalizing the
economy and promoting digital transactions. They also noted that the success of
this policy would depend on the overall design of tax reforms and greater financial
inclusion.

5. Pradhan Mantri Jan Dhan Yojana (PMJDY) - 2014

Policy Overview: This scheme aimed to provide financial services to the unbanked
population. It focused on ensuring access to banking, savings accounts, and
insurance for millions of Indians who had previously been excluded from the
formal financial system.
Both Mahajan and Garg have highlighted the importance of financial inclusion in
addressing poverty and fostering sustainable economic growth. They viewed
PMJDY as a step towards reducing economic disparities by bringing marginalized
communities into the financial fold

6. Swachh Bharat Abhiyan - 2014

Policy Overview: Launched in 2014, this initiative aimed at improving sanitation,
reducing open defecation, and promoting cleanliness across India. It had both
urban and rural components, focusing on the construction of toilets and the
promotion of hygiene practices.

Swachh Bharat Abhiyan was integral to improving public health and well-being.
By focusing on hygiene, sanitation, and waste management, it sought to create an
environment conducive to economic and social development. They emphasized the
need for sustained awareness and education campaigns to ensure the long-term
success of the initiative.

7. Atmanirbhar Bharat (Self-Reliant India) - 2020

Policy Overview: Announced during the COVID-19 pandemic, this initiative
aimed to boost local manufacturing, reduce dependency on imports, and promote
the "Make in India" vision. It included measures such as stimulus packages,
production-linked incentives (PLIs), and reforms in sectors like agriculture,
defense, and labor laws.

Atmanirbhar Bharat was an essential policy for strengthening India’s economic

resilience, particularly in light of global supply chain disruptions caused by the
pandemic. However, they cautioned that achieving self-reliance would require
significant investment in infrastructure, skill development, and research and
development (R&D).

8. Farm Laws (2020-2021)

Policy Overview: The government passed three controversial farm laws in 2020
aimed at liberalizing agricultural markets by allowing farmers to sell produce
outside government-regulated markets and promoting contract farming. However,
these laws were met with significant opposition and protests by farmers, leading to
their eventual repeal in 2021.

these farm laws as part of a broader agricultural reform agenda aimed at improving
the efficiency and profitability of the agriculture sector. However, they also
recognized that proper safeguards and support systems were necessary to ensure
the protection of farmers’ interests. The need for a balanced approach was evident
from the farmer protests and their eventual repeal.

CONCLUSION

Economic Transformation:

India's economy has transitioned from a socialist model to a market-oriented

system post-1991 through liberalization, privatization, and globalization.

Growth in Key Sectors:

The services sector is the largest contributor (60% of GDP), followed by
agriculture (important for 50% of the population), and manufacturing, bolstered by
initiatives like Make in India.

Infrastructure Development:

Major advancements in transportation (roads, railways, metro systems) and iconic

projects like the Atal Tunnel, Chenab Bridge, and Statue of Unity have enhanced
connectivity across the country.

Urbanization Challenges:

Rapid urbanization presents challenges such as housing shortages, traffic

congestion, and pollution, requiring enhanced urban policies and infrastructure.

FDI & Export Growth:

Foreign Direct Investment (FDI) and exports (especially in IT, textiles, and
pharma) have played a vital role in India’s economic growth.

COVID-19 Impact:

The COVID-19 pandemic led to a sharp GDP contraction, negatively affecting

industries and slowing job creation and poverty reduction efforts.
Unemployment & Underemployment:

Unemployment stood at 6.4% in urban areas during Oct-Dec 2024, while

underemployment remains a significant issue, particularly in rural areas and the
informal sector.

Income Inequality & Poverty:

Income inequality persists, with the top 20% of the population earning 50% of
household income. Poverty remains a challenge, although government schemes
and urbanization have helped reduce it.

Agricultural Distress & Climate Change:

Agricultural distress is driven by unviable farming practices, ineffective MSP, and

adverse trade terms. Climate change further exacerbates the situation, impacting
agriculture with unpredictable weather patterns.

Inflation Management:

Monetary policy (repo rate adjustments) and fiscal policy (taxation and subsidies)
are crucial to managing inflation. Challenges include food inflation, global price
fluctuations, and supply chain inefficiencies.

Infrastructure & Urbanization Issues:

Persistent infrastructure problems include poor rural road connectivity,
overcrowded railways, power shortages, and waste management issues.
Urbanization continues to strain housing and public services, creating a need for
better planning and sustainable development.

Government Policies:

Economic reforms like GST, Make in India, and Atmanirbhar Bharat aim to boost
manufacturing and streamline taxation.

Social welfare initiatives like PMJDY, Swachh Bharat Abhiyan, and PMMVY
promote financial inclusion, sanitation, and health.

Infrastructure programs such as Digital India and Pradhan Mantri Awas Yojana
aim to improve digital connectivity and provide affordable housing.

Technological reforms like Demonetization and Farm Laws (later repealed) aimed
to promote digital payments and agriculture market reforms.

Future Outlook:

India faces significant challenges, including unemployment, income inequality,

poverty, and infrastructure deficits. However, continued policy support, strategic
investments, and leveraging its young workforce hold the potential for India to
emerge as a global economic leader.
India’s economy is growing rapidly despite challenges. With a focus on
inclusive growth, sustainable development, and policy reforms, India has vast
potential for further growth and can play a leading role in the global
economy.

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