Unit 1: Historical and General Overview of Indian

Economy Since Independence

Overview
Since gaining independence in 1947, India’s economy has undergone significant
transformation, marked by distinct phases of policy, growth, and structural change. The
journey can be broadly divided into the following periods:
●​ 1947–1991: Planned Economy and State-Led Growth
●​ 1991 onwards: Economic Liberalization and Market Reforms
●​ 21st Century: Rapid Growth, Global Integration, and New Challenges
Key Phases and Features

1. Immediate Post-Independence Era (1947–1950s)

●​ India inherited a largely agrarian, underdeveloped economy with low
industrialization and high poverty.
●​ The economy was characterized by food shortages, low literacy, and limited
infrastructure9.
●​ The government adopted a planned development model, drawing inspiration
from socialist principles.

2. The Planning Era (1951–1991)

●​ Five-Year Plans: Centralized planning began with the First Five-Year Plan
(1951–56), focusing on agriculture, infrastructure, and basic industries.
●​ Public Sector Dominance: The state played a leading role in key sectors, with
heavy investments in steel, power, and transport.
●​ Import Substitution: Policies aimed to reduce dependence on foreign goods by
promoting domestic industries through tariffs and quotas.
●​ Mixed Results: While there was progress in infrastructure and industry, the
growth rate was modest (often called the “Hindu rate of growth,” around 3–3.5%
per year), and poverty remained widespread79.

3. Economic Crisis and Liberalization (1991)

●​ By the late 1980s, inefficiencies, fiscal deficits, and a balance of payments crisis
forced a rethinking of economic policy.
●​ In 1991, India launched sweeping economic reforms:
 ●​ Liberalization: Reduced government controls, deregulation, and
encouragement of private enterprise.
●​ Globalization: Opened the economy to foreign trade and investment.
●​ Privatization: Reduced the role of the public sector in many industries79.

4. Post-Reform Growth and Structural Change

(1991–Present)
●​ Accelerated Growth: GDP growth rates increased, averaging 6–7% per year in the
2000s and 2010s.
●​ Structural Transformation: The economy shifted from agriculture towards
industry and especially services. By the 2000s, services became the largest
contributor to GDP, while agriculture’s share declined sharply10.
●​ Demographic and Social Change: Rapid population growth, urbanization, and
improvements in literacy and life expectancy.
●​ Emergence as a Global Player: India became a major player in global IT,
pharmaceuticals, and services, while also increasing its trade and investment
links worldwide7.
Major Structural Changes Since Independence

Sector 1950–51 Share of 2007–08 Share of Key Trends

GDP GDP

Agricultu
56.5% 19.7% Declining share, but still employs many
re

Industry 13.6% 24.7% Steady growth, especially post-1991

Rapid expansion, now the dominant

Services 29.9% 55.6%
sector
 ●​ ​
Expansion in Social Overhead Capital: Major improvements in transport, energy,
education, and health infrastructure10.
●​ Financial Sector Growth: Nationalization and expansion of banking, increased
access to credit, and development of capital markets10.
Institutions and Policy Shifts
●​ Planning Commission (1950–2014): Central agency for planning and resource
allocation, replaced by NITI Aayog in 2015 to promote cooperative federalism
and strategic policy9.
●​ Economic Surveys and Data: Regular economic surveys and statistical reports
have become crucial for policy and academic analysis9.
Summary
India’s economic history since independence is a story of transition from a colonial,
agrarian economy to a mixed economy with a growing industrial and services sector.
The initial phase was marked by state-led development and import substitution,
followed by a major policy shift towards liberalization and global integration in 1991.
The result has been higher growth, significant structural changes, and a more dynamic,
globally connected economy, though challenges like poverty, inequality, and
employment remain central policy concerns7910.

Questions

1. Describe the main features of the Indian economy at

the time of Independence.
Answer:
●​ Predominantly agrarian, with over 70% of the population dependent on
agriculture.
●​ Low levels of industrialization and infrastructure.
●​ High poverty, illiteracy, and low life expectancy.
●​ Underdeveloped banking and financial sectors.
●​ Heavy dependence on imports for capital goods and technology.
●​ Partition led to significant economic disruption, loss of fertile land, and
displacement of people3.
2. What was the rationale behind adopting a planned
economy in India after Independence?
Answer:
●​ To accelerate economic growth and address widespread poverty and
underdevelopment.
●​ To ensure equitable distribution of resources and social justice.
●​ State-led planning was seen as essential for mobilizing resources for large-scale
infrastructure and industrial projects.
●​ The Planning Commission was established in 1950 to formulate Five-Year Plans
and guide resource allocation2.

3. Explain the objectives and achievements of the First

and Second Five-Year Plans.
Answer:​
First Five-Year Plan (1951–56):
●​ Focused on agriculture, irrigation, and energy.
●​ Based on the Harrod-Domar model.
●​ Achieved a growth rate of 3.6% (target was 2.1%).
●​ Major success in increasing food grain production and setting up IITs2.
Second Five-Year Plan (1956–61):
●​ Focused on rapid industrialization, especially heavy industries.
●​ Based on the Mahalanobis model.
●​ Emphasized public sector development and import substitution.
●​ Achieved moderate success but faced foreign exchange shortages and
inflation2.

4. Discuss the major structural changes in the Indian

economy since Independence.
Answer:
●​ Decline in the share of agriculture in GDP; rise of industry and services sectors.
●​ Expansion of infrastructure, banking, and education.
●​ Urbanization and demographic shifts.
●​ Increased role of the private sector, especially after 1991 reforms2.
5. What led to the economic reforms of 1991? Describe
their main features.
Answer:
●​ Severe balance of payments crisis, high inflation, and dwindling foreign reserves.
●​ Inefficiencies and slow growth under the earlier state-led model.
●​ Reforms aimed to liberalize, privatize, and globalize the economy (LPG model).
●​ Key measures: deregulation, reduction of import tariffs, encouragement of
foreign investment, and privatization of public sector enterprises6.

6. What is the significance of the Planning Commission in

India’s economic history?
Answer:
●​ Central body for formulating and implementing Five-Year Plans.
●​ Played a key role in resource allocation and setting development priorities.
●​ Chaired by the Prime Minister; first chairman was Jawaharlal Nehru.
●​ Replaced by NITI Aayog in 2015 to promote cooperative federalism and strategic
policy2.

7. Compare the pre- and post-1991 Indian economy.

Answer:

Aspect Pre-1991 Post-1991

Economic Model State-led, planned, closed Market-driven, liberalized, open

Growth Rate ~3–3.5% (“Hindu rate of growth”) 6–7% on average

Sectoral Focus Agriculture, heavy industry Services, industry, global trade

 Foreign Investment Restricted Encouraged

Role of Private Sector Limited Expanded

Global Integration Minimal Significant

8. Who were the key architects of the 1991 economic

reforms?
Answer:
●​ Prime Minister P.V. Narasimha Rao
●​ Finance Minister Dr. Manmohan Singh6
These questions and answers cover the most important theoretical aspects of Unit 1 for
your Indian Economy exam, focusing on historical developments, policy shifts, and key
structural changes since Independence.

Unit 2: Growth and Structural Change in the Indian

Economy
Growth and structural change refer to how the Indian economy’s size and composition
have evolved, especially since the 1991 economic reforms.

Growth Trends Since Independence

●​ Pre-1991:
●​ GDP growth was modest, averaging 3–4% per year, often called the “Hindu
rate of growth”4.
●​ The economy was dominated by agriculture, with limited industrial and
services activity.
●​ Post-1991 Economic Reforms:
 ●​ The 1991 reforms (Liberalization, Privatization, Globalization-LPG)
dismantled the License Raj, opened up the economy, and encouraged
private and foreign investment46.
●​ GDP growth accelerated:
●​ Averaged 5.7% per annum in the 1990s1.
●​ Rose to 7.3% per annum in the 2000s1.
●​ National income growth rate reached 9.3% in 2007–08 and 8.2% in
2023–245.
●​ India’s GDP increased from $270 billion in 1991 to $2.9 trillion in 20206.

Structural Change: Sectoral Composition

Structural change refers to the shift in the relative shares of agriculture, industry, and
services in GDP and employment.

Sector 1990-91 Share of 2022-23 Share of Key Trends

GDP GDP

Agricultu
~30% 18.3% Declining share, still a major employer
re

Moderate growth, especially

Industry ~27% ~27%
post-reforms

Services ~43% >50% Fastest growth, now dominant in GDP

●​ ​
Agriculture:
●​ Share in GDP has declined, but it remains a significant source of
employment5.
●​ Growth in agriculture has been uneven, with periods of both acceleration
and stagnation7.
 ●​ Industry:
●​ Benefited from deregulation and increased private investment post-1991.
●​ Growth has been higher than in the pre-reform period, but challenges
remain in job creation and global competitiveness56.
●​ Services:
●​ The most dynamic sector post-reforms, with rapid expansion in IT, finance,
telecom, and trade.
●​ Now contributes over half of India’s GDP and has driven much of the
post-1991 growth45.

Drivers of Growth and Structural Change

●​ Liberalization: Reduced government controls, allowing market forces to operate
freely.
●​ Privatization: Greater private sector participation in industry and services46.
●​ Globalization: Increased trade and foreign investment, integrating India into the
world economy46.
●​ Financial Sector Reforms: Expansion and modernization of banking, capital
markets, and regulatory institutions45.
●​ Infrastructure Development: Significant improvements in transport, energy, and
urban infrastructure, often through public-private partnerships4.

Challenges and Issues

●​ Jobless Growth: While GDP and services have grown rapidly, employment
generation in industry and services has not kept pace, leading to concerns about
job quality and underemployment6.
●​ Regional and Social Disparities: Growth and structural change have not been
uniform across states or social groups.
●​ Persistent Informal Sector: A large portion of the workforce remains in informal,
low-productivity jobs.

Summary
Since 1991, India has experienced rapid economic growth and a major structural
transformation. The economy has shifted from being agriculture-dominated to one led
by services and industry. These changes have been driven by economic reforms,
increased private and foreign investment, and integration with the global economy.
However, challenges such as employment generation, inequality, and ensuring inclusive
growth remain456.

1. Define structural change in the context of the Indian

economy. Explain its main indicators.
Answer:​
Structural change refers to the long-term shift in the composition of an economy,
typically from agriculture to industry and then to services. Main indicators include:
●​ Sectoral distribution of GDP: The share of agriculture, industry, and services in
total output.
●​ Employment distribution: The proportion of the workforce in each sector.
●​ Productivity levels: Movement of labor and capital from low-productivity sectors
(like agriculture) to higher-productivity sectors (like industry and services).
●​ Urbanization and migration: Movement of people from rural to urban areas, often
accompanying sectoral shifts57.

2. Discuss the major phases of growth and structural

change in the Indian economy since independence.
Answer:
●​ Phase 1 (1950s–1980): Slow growth, often called the “Hindu rate of growth”
(~3–4% per year). Agriculture dominated, with slow industrial and services
growth.
●​ Phase 2 (1980–1991): Growth accelerated to about 5.5–6% per year, driven by
initial policy relaxations and some industrial dynamism.
●​ Phase 3 (Post-1991): Economic reforms led to rapid growth (6–7% per year), with
a marked shift from agriculture to services and industry. Services sector became
the largest contributor to GDP7.

3. What were the main drivers behind India’s structural

transformation after 1991?
Answer:
 ●​ Economic reforms (Liberalization, Privatization, Globalization): Reduced
government controls, opened up to foreign investment, and fostered
competition68.
●​ Policy changes: Deregulation, reduction of import tariffs, and encouragement of
private sector participation.
●​ Technological adoption: Especially in services like IT and telecommunications.
●​ Increased trade integration: Enhanced exports and global economic
participation568.

4. Explain the sectoral imbalances that have emerged

during India’s structural transformation.
Answer:
●​ Agriculture’s declining GDP share: Dropped from over 40% in 1980 to about 15%
in 2019, but still employs over 40% of the workforce.
●​ Services sector boom: Now contributes over 50% of GDP but has not generated
enough jobs to absorb surplus labor from agriculture.
●​ Manufacturing stagnation: Growth in manufacturing has been sluggish, and the
sector has not absorbed as much labor as expected.
●​ Rise of low-skill jobs: Construction has become a significant employer, but many
jobs remain low-productivity5.

5. What are the key challenges associated with growth

and structural change in India? Suggest policy measures
to address them.
Answer:​
Challenges:
●​ Jobless growth: Rapid GDP growth has not translated into sufficient employment,
especially in industry and services.
●​ Low productivity in agriculture: A large workforce remains in low-productivity
agricultural jobs.
●​ Skill mismatch: Workers lack the education and skills needed for modern
sectors.
●​ Regional disparities: Growth has been uneven across states and social groups5.
Policy Measures:
 ●​ Strengthen education and vocational training: To help workers transition to higher
productivity sectors.
●​ Labor market reforms: To enhance flexibility and job creation.
●​ Promote manufacturing: Through incentives, infrastructure, and ease of doing
business.
●​ Foster trade integration: By reducing trade barriers and signing trade agreements.
●​ Improve social safety nets: To support those affected by structural shifts5.

6. How did the economic reforms of 1991 impact India’s

growth and structural change?
Answer:
●​ Marked a shift from a closed, centrally planned economy to a market-driven one.
●​ GDP growth accelerated, and the services sector expanded rapidly.
●​ Increased foreign investment, trade, and private sector participation.
●​ However, growth was uneven across sectors, with persistent challenges in
employment and manufacturing68.
These questions and answers comprehensively cover the theoretical and practical
aspects of growth and structural change in the Indian economy, as expected in a
university-level exam.

Unit 3: The Indian Economy in a Comparative Perspective

This unit examines how India's economic development and structure compare with
other major economies, particularly China, as well as its South Asian neighbors and
advanced economies like the US, UK, Germany, and Japan.

1. India vs. China: Sectoral Structure and Growth

●​ Sectoral Contribution to GDP (2003 example):
●​ Primary (Agriculture): India ~23%, China ~15%. India remains more
agrarian.
●​ Secondary (Industry): India ~26%, China ~53%. China’s growth is driven by
industry.
●​ Tertiary (Services): India ~51%, China ~32%. India’s growth is led by
services, especially IT and business outsourcing2.
●​ Growth Trajectory:
 ●​ Both countries began with large agrarian sectors and state-led
development.
●​ China’s reforms (starting in 1978) focused heavily on manufacturing and
export-led growth, while India’s reforms (post-1991) emphasized services
and gradual liberalization12.
●​ China has transitioned to a middle-income economy; India remains
lower-middle income, with per capita income much lower than China’s1.

2. India Among the World’s Largest Economies

●​ Current Position:
●​ India is the fourth-largest economy globally in 2025, on par with Japan,
and is forecasted to become the third-largest by 20304.
●​ Nominal GDP (2025): $4.27 trillion; GDP (PPP): $17.36 trillion3.
●​ Despite its large economy, India’s per capita income remains low ($2,940),
reflecting its large population and persistent poverty3.
●​ Growth Rate:
●​ India is the fastest-growing major economy, with projected growth rates of
6.2–6.5% for 2025–26, outpacing most developed and emerging
economies4.

3. Comparison with Advanced Economies

Country Nominal GDP (USD GDP per Capita Growth Rate Key Features

Trillion, 2025) (USD) (%)

United Innovation, finance,

28.78 85,373 1.8
States services

Manufacturing, exports,
China 19.41 13,721 4.5
tech
 Advanced tech, aging
Japan 4.23 33,950 1.2
population

Services-led, young
India 4.27 2,940 6.2–6.5
population

Services, finance,
UK 3.73 54,280 1.5
post-Brexit

●​ ​
India’s per capita income is much lower than advanced economies, despite being
among the largest by overall GDP34.

4. Human and Social Development Indicators

●​ Income vs. Social Progress:
●​ While India’s economic growth is impressive, its social indicators (literacy,
health, nutrition, sanitation) lag behind many countries, including some
with lower per capita incomes like Bangladesh and Nepal5.
●​ For example, Bangladesh outperforms India in life expectancy, child
survival, and fertility rates, despite having lower per capita income5.
●​ India’s progress in social indicators is better than some neighbors (like
Pakistan), but still falls short of global averages and some South Asian
peers5.

5. Key Takeaways from Comparative Perspective

●​ Strengths:
●​ Rapid economic growth and global economic stature.
●​ Strong services sector, especially in technology and business outsourcing.
●​ Young and growing population, providing demographic advantage.
●​ Challenges:
●​ Low per capita income and persistent poverty.
 ●​ Lagging social indicators compared to economic peers.
●​ Need for more inclusive growth and improvements in health, education,
and infrastructure.

Summary
India’s economic rise is notable in global rankings, but its development
path-services-led, with persistent agrarian employment-differs from China’s
manufacturing-led model and from advanced economies’ high per capita incomes and
strong social indicators. India’s comparative strengths lie in its growth and services, but
it faces significant challenges in translating economic gains into broad-based human
development12345.

1. Compare the economic growth rates of India and China

since 1980. What factors explain the differences?
Answer:
●​ Growth Rates:
●​ From 1980-1990, China’s GDP grew at an average annual rate of 10.3%,
while India’s was 5.7%.
●​ In 2015-2017, China’s growth moderated to 6.8%, while India’s rose to
7.3%1.
●​ Key Factors:
●​ China’s higher savings and investment rates, and a strong focus on
manufacturing and infrastructure, drove its rapid growth2.
●​ India’s growth has been more service-sector led, with lower investment in
physical capital compared to China.
●​ China’s reforms started earlier (late 1970s), with export-led
industrialization, while India liberalized in 1991 and focused more on
services2.

2. How do India’s imports and exports compare with

those of China and Pakistan? What does this indicate
about India’s trade relations?
Answer:
 ●​ India’s exports to Pakistan grew at an annualized rate of 3.7%, and to China at
2.6%.
●​ India’s imports from China grew much faster, at 10.3%, compared to 5.1% from
Pakistan1.
●​ This indicates India is heavily dependent on China for imports, leading to a
significant trade deficit with China. In contrast, trade with Pakistan is smaller and
more balanced1.

3. What are liberty indicators? Give examples and explain

their importance in comparing economies.
Answer:
●​ Liberty indicators measure the degree of freedom and individual rights in a
society1.
●​ Examples include:
●​ Democratic participation in decision-making
●​ Constitutional protection of citizens’ rights
●​ Independence of the judiciary
●​ Rule of law1
●​ These indicators are important because economic development is not just about
income, but also about political and civil freedoms, which affect quality of life
and social progress.

4. Why has Pakistan experienced slow economic growth

and a re-emergence of poverty compared to India and
China?
Answer:
●​ Reasons include political instability, over-dependence on remittances and foreign
aid, and volatile agricultural performance1.
●​ These factors have hindered consistent policy implementation and investment,
leading to slower growth and persistent poverty.

5. Highlight the main differences in the development

strategies of India and China.
Answer:
 ●​ China:
●​ Focused on physical capital accumulation and manufacturing2.
●​ High savings and investment rates, export-oriented industrialization, and
massive infrastructure spending.
●​ India:
●​ Balanced investment between physical and human capital, with significant
public spending on education2.
●​ Growth led by the service sector, especially IT and business process
outsourcing.
●​ Industrial sector’s share of GDP has remained relatively stagnant
compared to China2.

6. Compare India’s social indicators with those of China

and sub-Saharan Africa.
Answer:
●​ India lags behind China in health and education indicators, such as literacy, life
expectancy, and infant mortality2.
●​ In some areas, such as undernutrition and child health, India’s performance is
comparable to or worse than some sub-Saharan African countries2.
●​ India also exhibits high gender inequality, with a low female-male ratio and
limited opportunities for women2.

7. What lessons can India learn from the development

experiences of East Asian economies?
Answer:
●​ Importance of high investment in infrastructure and manufacturing.
●​ Need for export-oriented policies and integration with global markets.
●​ Focus on human capital development (education and health) to support
industrialization and inclusive growth2.
These questions and answers cover the comparative perspective of the Indian
economy, focusing on growth, trade, development strategies, social indicators, and
lessons from other countries-key themes for theory exams on this unit1246.
Unit 4: Key Issues-Poverty, Inequality, Education, Health,
and Gender

Poverty
●​ Dramatic Decline: India has seen a historic reduction in poverty. As of 2025,
extreme poverty rates have fallen below 5% nationally, with rural poverty at 4.86%
and urban at 4.09%15.
●​ International Benchmarks: Using the global $2.15/day poverty line, extreme
poverty dropped from 16% in 2011-12 to just 2.3% in 2022-23, lifting 171 million
people above this threshold7. At the $3.65/day lower-middle-income line, poverty
fell from 61.8% to 28.1%, moving 378 million people out of poverty57.
●​ Multidimensional Poverty: This index-which includes factors like education and
basic services-declined from 29.17% in 2013-14 to 11.28% in 2022-234.
Non-monetary poverty (excluding nutrition and health) also fell sharply, showing
broad-based development7.
●​ Regional Progress: Major states like Uttar Pradesh, Maharashtra, Bihar, West
Bengal, and Madhya Pradesh contributed most to poverty reduction, though they
still account for a large share of the remaining poor7.

Inequality
●​ Income and Consumption Gaps: While consumption inequality (measured by the
Gini index) has improved-from 28.8 to 25.5-income inequality has worsened, with
the Gini index rising from 52 to 627. The top 10% earn 13 times more than the
bottom 10%7.
●​ Urban-Rural Divide: The rural-urban poverty gap has narrowed significantly, but
disparities persist in income, access to services, and employment57.
●​ Employment Trends: Youth unemployment is high at 13.3%, and even higher
among graduates (29%). Most jobs remain informal, especially in agriculture,
limiting income mobility7.

Education
●​ Investment and Challenges: Education spending has grown, but experts call for
raising it to 6% of the total budget to improve quality and access68.
●​ Youth Demographics: With over 40% of the population under 25, education is
crucial for India’s future workforce and economic growth6.
 ●​ Reforms Needed: Calls for integrating health education, life skills, and mental
health awareness into curricula to address rising mental health challenges
among students6.
●​ Quality and Access: There remain gaps in infrastructure, teacher training, and
equitable access, especially in rural and marginalized communities8.

Health
●​ Funding Gaps: Health expenditure has risen but remains insufficient to address
malnutrition, public health infrastructure, and preventive care8.
●​ Youth Health: Mental health issues among students are a growing concern, with
30–40% facing serious challenges6.
●​ Policy Focus: There are increasing demands for integrating health education in
schools and prioritizing health in national budgets to build a resilient, productive
population68.

Gender
●​ Female Employment: Female labor force participation remains low at 31%, with a
234 million gap compared to men7.
●​ Persistent Inequality: Despite overall progress, women face barriers in
employment, education, and health access.
●​ Policy Imperatives: Addressing gender gaps in education, employment, and
health is essential for inclusive growth and harnessing India’s demographic
dividend78.

Summary Table

Issue Recent Progress Remaining Challenges

Poverty Below 5% extreme poverty17 Regional pockets, sustainability, data gaps

Inequality Lower consumption inequality7 Rising income inequality, job informality

 Educatio
Increased spending8 Access, quality, mental health, rural gaps
n

Health Funding growth8 Malnutrition, mental health, infrastructure

Gender More women in workforce7 Low participation, education, health gaps

India’s progress in reducing poverty and improving basic indicators is significant, but
challenges in inequality, education quality, health infrastructure, and gender disparities
remain central to the development agenda. Strategic investments and reforms in these
areas are vital for sustaining inclusive growth and realizing the nation’s full
potential678.

1. Who is responsible for poverty estimation in India, and

how is the poverty line determined?
Answer:​
Poverty estimation in India is currently carried out by NITI Aayog’s task force, using
data from the National Sample Survey Office. The poverty line is determined based on
consumption expenditure, not income. Historically, major committees like the Y.K.
Alagh Committee (1979), Lakdawala Committee (1993), Tendulkar Committee (2009),
and Rangarajan Committee (2014) have set methodologies for defining the poverty
line. The Tendulkar Committee’s approach, which uses a uniform urban and rural
basket, remains widely referenced178.

2. Describe the recent trends in poverty reduction in

India. What are the main contributing factors?
Answer:​
India has seen a dramatic decline in poverty:
●​ Extreme poverty (below $2.15/day) fell from 16.2% in 2011-12 to 2.3% in
2022-23, lifting 171 million people out of poverty2.
 ●​ Rural poverty dropped to 4.86% and urban poverty to 4.09% in 2024, according to
the latest government data7.
●​ Key contributing factors include higher consumption growth among the poorest,
targeted welfare schemes (like MGNREGA, Ayushman Bharat, PM Jan Dhan
Yojana), and robust food security measures27.

3. What is multidimensional poverty? How has India

performed in this area recently?
Answer:​
Multidimensional poverty considers deprivations in health, education, and living
standards, not just income. India’s multidimensional poverty rate declined from 29.17%
in 2013-14 to 11.28% in 2022-23, lifting nearly 250 million people out of poverty. The
National Multidimensional Poverty Index (MPI) is used to assess this progress2.

4. Discuss the trends in inequality in India. Has inequality

increased or decreased in recent years?
Answer:​
Consumption inequality in India has decreased, as reflected in the Gini coefficient
dropping from 37.5 in 2011-12 to 29.1 in 2023-245. The largest improvements in
consumption were seen among the bottom three deciles of the population, indicating
more equitable growth. However, income inequality remains a concern, and disparities
persist across regions and social groups52.

5. Explain the significance of government initiatives in

poverty alleviation. Name at least three major schemes.
Answer:​
Government initiatives have played a crucial role in poverty reduction by providing social
security, healthcare, financial inclusion, and employment opportunities. Three major
schemes are:
●​ MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act):
Provides rural employment and income support.
●​ Ayushman Bharat Yojana: Offers health insurance to poor families.
●​ PM Jan Dhan Yojana: Promotes financial inclusion by opening bank accounts for
the unbanked72.
6. What are the challenges that remain in addressing
poverty and inequality in India?
Answer:​
Despite progress, challenges include:
●​ Persistent pockets of poverty in certain regions and among marginalized groups.
●​ Inconsistent and outdated poverty line benchmarks.
●​ Income inequality remains high, and many still lack access to quality education,
healthcare, and decent employment.
●​ Data reliability and effective targeting of welfare schemes257.

7. How does poverty reduction differ among various

social groups in India?
Answer:​
Poverty rates have declined across all major social groups, but disparities remain. For
example, poverty among Scheduled Tribes in rural areas fell from 49.5% in 2011-12 to
12.2% in 2023-24, and among Scheduled Castes in urban areas from 39.6% to 6.6%.
OBC and Muslim communities also saw significant reductions, but the ST population
still has the highest poverty rates3.
These questions and answers cover the most important theoretical and factual aspects
of poverty, inequality, education, health, and gender issues in India, as required for a
theory exam.

Unit 5: Agriculture, Industry, Services, and International

Trade

Agriculture
●​ Role and Trends: Agriculture remains a crucial sector for India, providing
livelihoods to a significant share of the population, especially in rural areas.
However, its share in GDP has declined steadily over the years as the economy
has diversified.
●​ Current Challenges: The sector faces issues such as low productivity, fragmented
landholdings, dependence on monsoons, and price volatility. Despite these
challenges, agriculture is vital for food security and rural employment.
 ●​ Recent Developments: Government initiatives focus on modernization, improving
irrigation, crop diversification, and promoting agri-tech to boost productivity and
farmer incomes.

Industry
●​ Contribution: Industry (including manufacturing, mining, electricity, and
construction) plays a key role in economic development and job creation. Its
share in GDP has remained relatively stable but has not grown as rapidly as the
services sector.
●​ Key Sectors: Electronics, textiles, chemicals, automobiles, and pharmaceuticals
are major contributors to industrial output and exports.
●​ Challenges: The sector faces hurdles like infrastructure bottlenecks, regulatory
complexities, and global competition. Efforts such as “Make in India” aim to
boost manufacturing and attract investment.

Services
●​ Dominant Sector: The services sector is the largest and fastest-growing segment
of India’s economy, contributing over 50% of Gross Value Added (GVA) and
employing more than 30% of the workforce234.
●​ Growth Drivers: Rapid expansion is fueled by technology adoption, digital
infrastructure, financial services, IT, e-commerce, and professional services.
States like Maharashtra, Karnataka, and Tamil Nadu lead in services GVA2.
●​ Recent Performance: In FY2024, the services sector grew at 7.6–8.3%, with
strong domestic and international demand, especially in digital and high-tech
services1235. The sector’s Purchasing Managers’ Index (PMI) has consistently
indicated robust expansion, and services exports have become a major source of
foreign exchange35.
●​ Future Outlook: The sector is expected to continue its growth, reaching 56% of
GVA by 2047, driven by investments in technology, skill development, and digital
transformation2.

International Trade
●​ Export Performance: India’s combined goods and services exports surpassed
$820 billion in 2024–25, growing nearly 6% year-on-year despite global
uncertainties68. Merchandise exports were around $395.6 billion, while service
exports reached $354.9 billion6.
 ●​ Key Export Sectors: Electronics, textiles, minerals, garments, and IT/software
services are major export drivers. Services exports now account for 44% of total
exports, with India ranking fifth globally in services exports36.
●​ Trade Partners: The US, UAE, UK, China, Japan, Brazil, and Australia are major
trading partners8.
●​ Global Position: India is projected to contribute 6% to global trade growth over
the next five years, making it the third-largest driver after China and the US8.
India’s trade-to-GDP ratio is approaching that of China, reflecting increasing
integration with the world economy8.
●​ Trade Balance: The trade deficit narrowed to $78.1 billion in FY24 from $121.6
billion the previous year, supported by strong services exports8.

Summary Table: Sector Contributions & Trends

Sector Share of GVA Key Trends & Highlights

(2024)

Agricult Declining share, focus on modernization, food security, rural

~15%
ure livelihoods

Stable share, “Make in India” push, challenges in

Industry ~27%
competitiveness

Fastest growth, digital transformation, global leader in

Services 55%+
IT/outsourcing

$820+ billion Rising global share, strong services exports, narrowing trade
Trade
exports deficit
India’s economic structure is marked by a dominant, rapidly growing services sector, a
stable but challenged industrial base, and an agricultural sector that remains vital for
livelihoods but is shrinking in GDP share. International trade is increasingly important,
with India emerging as a major global player, especially in services and high-value
exports68.
​

1. Explain the classification of sectors in the Indian

economy. Give examples of activities in each sector.
Answer:​
The Indian economy is classified into three sectors based on economic activities:
●​ Primary Sector: Involves extraction and production of natural resources.
Examples: agriculture, mining, fishing, forestry, dairy7.
●​ Secondary Sector: Involves manufacturing and processing. Examples: industrial
production, textile manufacturing, sugar production7.
●​ Tertiary Sector: Involves providing services that support primary and secondary
sectors. Examples: transport, banking, insurance, trade, IT services7.

2. Discuss the recent trends in the contribution of

agriculture, industry, and services to India’s Gross Value
Added (GVA).
Answer:
●​ Agriculture: Its share in GVA has declined over the years and is currently around
15%.
●​ Industry: The sector’s share has remained relatively stable, with growth driven by
construction and manufacturing. Industrial sector growth is estimated at 6.2%
for FY-253.
●​ Services: The services sector’s contribution to total GVA has risen to 55.3% in
FY25, making it the largest sector in the economy39. This sector also employs
about 30% of the workforce9.

3. What are the main reasons behind the rapid growth of

the services sector in India?
Answer:
 ●​ Liberalization and LPG reforms: Opened up sectors like banking, insurance, and
telecom for private participation6.
●​ Technological advancements: Growth in IT, BPO, and digital services68.
●​ Increase in income and urbanization: Led to higher demand for services such as
education, healthcare, and financial services6.
●​ Trade integration: India is among the top 10 global exporters of services, with a
4.3% share in global services exports in 2023639.
●​ Government policies: Initiatives like Digital India, PMJDY, and Services Export
from India Scheme have boosted the sector6.

4. Describe the role and challenges of the agriculture

sector in India.
Answer:
●​ Role: Agriculture provides livelihoods for nearly 40% of India’s workforce and
ensures food security5.
●​ Challenges: Low productivity, fragmented landholdings, dependence on
monsoons, and price volatility.
●​ Recent focus: Modernization, crop diversification, and agri-tech adoption to boost
productivity and farmer incomes5.

5. How has India’s international trade evolved in recent

years? What are the major export sectors?
Answer:
●​ Growth: India’s combined goods and services exports surpassed $820 billion in
2024–25, with services exports accounting for 44% of total exports59.
●​ Major export sectors: IT and software services, electronics, textiles, garments,
and pharmaceuticals59.
●​ Trade partners: The US, UAE, UK, China, and Japan are key trading partners5.
●​ Performance: India’s share in global services exports reached 4.3% in 2023,
ranking among the top five countries worldwide39.

6. What government initiatives have been taken to

promote industry and trade in India?
Answer:
 ●​ Make in India: To boost manufacturing and attract investment.
●​ Green Growth and Green Energy Mission: To promote sustainable
industrialization5.
●​ Digital India and Startup India: To foster innovation and entrepreneurship5.
●​ Liberalization of FDI norms: To encourage foreign investment in key sectors6.

7. What challenges does the Indian industry face despite

recent growth?
Answer:
●​ Infrastructure bottlenecks
●​ Regulatory complexities
●​ Global competition
●​ Need for skill development and technological upgradation
These questions and answers cover the most important theoretical and factual aspects
of agriculture, industry, services, and international trade in India, as highlighted by the
latest Economic Survey and current affairs3569.