#Day 45 (CLAT 2022 Free Study Plan): Overview of Indian Economy

It provides you with information that helps the reader’s comprehension. It lays the foundation for effective communication. Eliminating the economy will help you reward yourself with clear comprehension and communication. Today we shall discuss "Economy''.

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Nehru and other thinkers of the newly independent India sought an alternative to the extreme versions of capitalism and socialism. Combined best features of socialism without its drawbacks. India envisaged as a socialist society with a robust public sector but also with private property and democracy.

Types of Economic Systems:

• Capitalist Economy: 
  • the goods produced are distributed between people, not based on what people need but on the basis of Purchasing Power, i.e. the ability to buy goods and services.
• Socialist Economy:
  • government choose what goods are to be produced a/c to the needs of society.
• Mixed Economy:
  • government and the market together answer the 3 questions: 
    • what to produce, 
    • how to build, and 
    • how to distribute
  • In this type, the market will provide whatever goods and services it can deliver well, and the government will provide essential goods and services which the market fails to do.
  • India follows a mixed Economy.

Although India is an agro-based economy but the substantial emphasis has been given on the development of industries (both consumer goods & capital goods), service sector (including construction, trade, commerce, banking system etc.) and socio-economic infrastructure (viz. education, health, housing power, energy, transport, communication etc.).

On the basis of production:

(i) Primary or Agricultural Sector

This sector comprises of agriculture and its allied activities including dairy, poultry, cattle rearing, fishing, forestry, animal husbandry etc. Regarding the primary sector, most of the goods are produced by using natural resources. Since India is an overpopulated agro-based economy, hence, this sector plays an important role in economic growth.

(ii) Secondary or Manufacturing Sector:

This sector is also known as the industrial sector. In this sector, all types of manufacturing sectors like large-scale, small-scale, and tiny scale are included. Small scale industries include clothes, candles, poultry, matchbox, handloom, toys, etc. These units provide huge employment. Whereas large-scale industries like iron and steel, heavy engineering, chemicals, fertilizers, shipbuilding, etc. contribute a large amount to our gross domestic product.

(iii) Service or Tertiary Sector:

This sector includes different services like transport, communication, banking, insurance, trade, and commerce, including both national and international trade. In addition to these, all the professional services like doctors, engineers, teachers, lawyers etc. come under the service sector. Again the services provided by the government for the welfare of citizens are also included in the tertiary sector.

On the basis of Ownership or Organization:

(i) Public Sector:

It consists of all the economic organizations that are controlled and managed by the government. All the government-owned production units comprise the public sector. These units are involved in the production and distribution of goods and services among the common mass with an objective of welfare motives.

(ii) Private Sector:

It comprises of all the economic enterprises which are controlled and managed by the private enterprises. All the privately-owned production units make up the private sector. These units will produce and sell the goods and services to the people with an objective of the profit motive.

On the basis of habitation:

(i) Rural Sector:

According to M.K. Gandhi, “India lives in villages”. About 65% of the total population in India reside in rural areas. The main occupations of the people of this sector are agriculture and allied activities.

(ii) Urban Sector:

One-third of the total population in India lives in the urban sector. It consists of towns and cities. People residing in this sector are mainly engaged in either secondary sector or tertiary sector.

Understanding Economics:

• Economics is the study of how people in a system allocate scarce resources for the purpose of production, distribution, and consumption, both individually & collectively.
• 2 major types of economics are:

Microeconomics: focuses on the behavior of individual consumers and producers, & Macroeconomics: examines the overall economies on a regional, national, or international scale.

Microeconomics vs Macroeconomics

India’s Sector wise GDP Contribution:

Distribution of the workforce across economic sectors: 

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