Indian Economy: Development Experience and Current Issues
This domain spans planning, the 1991 reforms, structural change, poverty, employment and contemporary policy. Questions often ask you to explain a trend with a reason rather than merely name a scheme.
Core rules
- Planning began in 1950 with the Planning Commission; the Second Plan adopted the Mahalanobis heavy-industry strategy. NITI Aayog replaced the Planning Commission in 2015.
- The 1991 crisis produced the LPG reforms: liberalisation, privatisation and globalisation, with industrial licensing diluted and the rupee devalued.
- Structural change: agriculture's share of gross value added has fallen sharply while services have risen, yet agriculture still employs a large share of workers, indicating low productivity and disguised unemployment.
- Poverty is measured through consumption expenditure, historically by calorie norms and later by the Tendulkar Committee; the Multidimensional Poverty Index counts deprivations in health, education and living standards.
- MGNREGA (2005) legally guarantees 100 days of unskilled wage employment per rural household on demand.
- Current issues: GST (2017), flexible inflation targeting with CPI at 4% ± 2%, UPI and digital payments, production-linked incentives, MSP and demographic dividend.
Worked example
In 1950-51 agriculture contributed roughly half of national output and now contributes about 18%, while services exceed 50%. Since about 45% of workers remain in agriculture, output per worker there is far below services. Low labour productivity limits rural incomes and explains why poverty reduction lags behind GDP growth - a structural, not merely statistical, problem.
Traps that cost marks
- Calling the pre-1991 economy purely socialist; it was a mixed economy with a large public sector.
- Treating MGNREGA as a supply-driven wage subsidy; it is a demand-driven legal guarantee.
- Saying poverty is estimated from income data; Indian poverty lines use consumption expenditure.
- Equating disinvestment with outright privatisation.