Complete Notes on Basics of Indian Economy for BPSC and Other Competitive Exams in 2025
Economics- 1
Basics of Indian Economy
Characteristics of Indian Economy
The Indian economy is often described as a developing mixed economy with unique structural features. Here are the key characteristics:
1. Developing Economy
- India has low per capita income but improving GDP growth.
- Large section of population still depends on agriculture.
- High levels of poverty, unemployment, and underemployment.
2. Mixed Economy
- Coexistence of public sector (government-owned) and private sector (private enterprise).
- Sectors like defense, railways, power generation – government-dominated.
- Liberalization (since 1991) promoted private participation in all sectors.
3. Dual Structure of Economy
- Modern industrial sector coexists with traditional agriculture and handicrafts.
- Disparities in technology, income, productivity, etc.
4. Demographic Features
- Large population (over 1.4 billion), high dependency ratio.
- Increasing working-age population (demographic dividend).
- High urban-rural divide.
5. Predominance of Agriculture
- Though its GDP contribution is declining (~16%), over 40% of workforce still engaged.
- Season-dependent, fragmented land holdings, low productivity.
6. Low Capital Formation
- Inadequate savings and investment.
- Financial inclusion has improved due to Jan Dhan Yojana, UPI, etc.
7. Unemployment and Underemployment
- Structural, disguised, seasonal unemployment.
- Skill mismatch; informal employment dominates.
8. Income Inequality and Regional Imbalances
- Urban areas more developed than rural.
- Inter-state disparities (e.g., Kerala vs. Bihar in HDI).
9. Large Informal Sector
- Majority of workers employed without formal contracts, social security.
- Unorganized sector accounts for over 80% of total employment.
10. Globalization and Reforms
- Post-1991 liberalization policies led to increased integration with global economy.
- Focus on FDI, Make in India, exports, digital economy.
Planning in India: 5-Year Plans and NITI Aayog
Historical Background of Planning
- Inspired by Soviet model of planned economy.
- Planning Commission set up in 1950 by Government of India.
- First Five-Year Plan began in 1951 under PM Nehru.
Five-Year Plans (1951–2017)
First Five-Year Plan (1951–56)
- Focus: Agriculture, irrigation, price stability.
- Inspired by Harrod-Domar model.
- Achieved 3.6% growth (target: 2.1%).
Second Plan (1956–61)
- Focus: Industrialization (heavy industries).
- Mahalanobis Model.
- Established PSUs, steel plants.
Third Plan (1961–66)
- Focus: Self-reliant economy.
- Hit by wars (1962, 1965) and droughts.
Plan Holiday (1966–69)
- Three annual plans due to economic instability.
Fourth Plan (1969–74)
- Focus: Growth with stability.
- Nationalization of banks (1969).
Fifth Plan (1974–79)
- Focus: Poverty removal (Garibi Hatao), self-reliance.
- Terminated in 1978.
Sixth Plan (1980–85)
- Focus: Liberalization, technological modernization.
Seventh Plan (1985–90)
- Focus: Food, work, productivity, social justice.
Annual Plans (1990–92)
- Political instability and Gulf War impact.
Eighth Plan (1992–97)
- First plan after LPG reforms.
- Focus: Human development, privatization.
Ninth Plan (1997–2002)
- Focus: Growth with equity.
Tenth Plan (2002–07)
- Target: 8% growth rate (achieved 7.6%).
Eleventh Plan (2007–12)
- Focus: Inclusive growth.
Twelfth Plan (2012–17)
- Focus: Faster, sustainable, inclusive growth.
- Last Five-Year Plan.
NITI Aayog (National Institution for Transforming India)
Formation:
- Replaced Planning Commission on 1 January 2015.
- Objective: Promote cooperative federalism.
Structure:
- Chairperson – Prime Minister.
- Vice-Chairperson – Appointed by PM.
- CEO – Full-time, appointed by PM.
- Full-time & part-time members.
- Governing Council – All Chief Ministers and Lt. Governors.
Functions:
- Policy think tank of Government of India.
- Promotes digital India, innovation, sustainable development.
- No power to allocate funds (unlike Planning Commission).
- Focus on outcome-based monitoring.
- Drafts strategies like:
- Strategy for New India @75
- Aspirational Districts Programme
Major Initiatives:
- Atal Innovation Mission (AIM)
- Health Index, SDG Index, Export Preparedness Index
- Gig economy, EV policy recommendations
Objective Questions : Basics of Indian Economy
1. Which characteristic best defines a mixed economy like India?
A) Complete government ownership
B) Only private enterprises
C) Coexistence of public and private sectors
D) Absence of planning
Answer: C
2. Who is the Chairperson of NITI Aayog?
A) Finance Minister
B) President of India
C) Prime Minister of India
D) RBI Governor
Answer: C
3. The Twelfth Five-Year Plan focused on:
A) Liberalization
B) Industrialization
C) Inclusive and Sustainable Growth
D) Import Substitution
Answer: C
4. The Planning Commission was replaced by NITI Aayog in the year:
A) 2012
B) 2014
C) 2015
D) 2016
Answer: C
5. Which plan is known for the slogan “Garibi Hatao”?
A) First
B) Third
C) Fifth
D) Ninth
Answer: C
6. Mahalanobis Model was adopted in which Five-Year Plan?
A) First
B) Second
C) Third
D) Fourth
Answer: B
Note: These Notes are not complete notes, but it provides you with basics structure of the topic . Now one has to study and make handwritten notes for your self . You must read from your own notes and practice on paper. The basic rule is one must write the subject atleast five times so that your nerve takes you to the finer points when you are mentally rehearsing.
