INDIAN ECONOMY — MAJOR CONCEPTS, INDICATORS AND INSTITUTIONS

PRERNA FOR IAS

         Mehnat Aapki, Guidance Humari

         Roz ki Prelims Practice — Experts ke Saath

INDIAN ECONOMY — MAJOR CONCEPTS, INDICATORS AND INSTITUTIONS

1. Nature of the Indian Economy

• India follows a mixed economy, in which both the public sector and private sector participate in production, investment and service delivery.
• After Independence, India adopted planning with substantial state involvement; from 1991, liberalisation, privatisation and globalisation reforms increased the role of markets and private enterprise. (NITI Aayog)
• Agriculture, industry and services together constitute the broad structure of the economy.

2. Gross Domestic Product (GDP)

• GDP is the total monetary value of final goods and services produced within a country’s domestic territory during a specified period.
• It is one of the most important measures of the size and growth of an economy.
• GDP may be measured at current prices or at constant prices to distinguish nominal growth from real growth.
• India is among the world’s largest economies in aggregate GDP terms.

3. Per Capita Income

• Per capita income broadly indicates the average income available per person and is obtained by dividing national income by population.
• It is useful for comparing broad standards of living over time and across countries.
• However, it does not show the distribution of income, inequality, access to public services or quality of life.
• Therefore, development must be assessed through several indicators, not income alone.

4. Inflation

• Inflation means a sustained increase in the general price level, resulting in a decline in the purchasing power of money.
• In India, retail inflation is commonly measured through the Consumer Price Index (CPI).
• Inflation may arise from rising demand, supply shortages, higher input costs or external shocks.
• Persistent high inflation particularly affects low-income households because food and essential goods form a larger part of their expenditure.

5. Economic Growth and Economic Development