Economy

Why is India still a Developing Country?

The United Nations has divided countries into three major categories, namely, developed countries, developing countries and underdeveloped countries. This classification is based on various factors, economic status being the most immediate, including important parameters like Gross Domestic Product, Gross National Product, Per Capita Income, standard of living etc. The term ‘developed counties’ mostly refers to those which have highly progressed economies and have shown great technological progress, as compared to most other nations. Countries like the United States, Britain and Japan can be categorised as developed countries. On the other hand, developing countries are those which display low industrialization and low human development index. Countries like India and Pakistan can be put under this category. An underdeveloped country is a country which is not economically as developed as the advanced countries and has a very low per capita income coupled with widespread poverty, and whose residents live in very dreadful conditions. Countries like Nepal, Bhutan and many African counties fall under this category. There are various qualitative as well as quantitative factors which help us to calculate these economic indices.

India is classified as a developing country with its GDP amounting to 2.6 lakh crores USD in 2017 according to World Bank estimates. It’s the world’s fifth largest economy by nominal GDP and the third largest by purchasing power parity. According to IMF, on a per capita basis, India ranked 142nd by GDP and 119th by GDP per capita in the year 2018. In spite of all these factors we will find out why the Indian Economy is lagging behind the developed economies.

Reasons why India is a developing country

Firstly, India has a very low per capita income as compared to the developed countries. Our per capita income was as low as $5610 as estimated in 2014. The difference of per capita income between the developed countries and India is also very large. However, we notice post 1990 to 2014, the Indian economy has grown at a faster rate than many of the developed countries. Even though the per capita income difference got narrowed down, there still exists a difference between the standard of living conditions of the residents of a developed country and India which is quite significant and large.

Secondly, one of the basic features of a developing nation is its primary product. In India, a very large population (as much as half) is dependent on agriculture which also comprises a very important part of its national income. In 2014, the World Bank estimated that 47% of the Indian population was engaged in agriculture and its contribution to the National Income was 17%. The proportion of the workforce with respect to the population engaged in agriculture is much less in developed countries as compared to India. Hence India’s large dependence of agriculture as opposed to the secondary and tertiary sectors is also an important reason as to why our National Income is so low.

Thirdly, the most weighted problem which India faces is the pressure of its huge population. According to recent estimates India is the second most populated country in the world and our population is equivalent to 17.74% of the world’s population in total. This is due to the fact that India has very high level of birth rate with a declining level of death rates. This increasing population also demands a higher rate of economic growth which could maintain the same standard of living for the entire population. This further adds on to the burden on the agricultural sector which has to feed this increasing population. Moreover, this increase in the population levels also leads to an increase in the labour supply and this rapid growth of labour force creates a high supply of labour than its demand which in turn leaves majority of the people unemployed.

Fourthly, we know that India has an abundant labour supply and it is actually very difficult to provide employment to its entire working population. In developed nations unemployment does not prevail as such and even if it does, it is cyclic and is due to the lack of effective demand. On the other hand, unemployment is India is structural and is due to the deficiency of capital, which could have otherwise absorbed this excess labour supply. Likewise, we also see that in our agricultural sector, more labourers are employed than what is actually needed. The marginal productivity of these excess workers is zero or negative and therefore we can say these excess workers are disguised unemployed. Disguised unemployment prevails in our economy because of the absence of alternative employment opportunities and the heavy pressure of population.

Next we notice that there is a large inequality in the distribution of assets, which is also the principal cause of unequal distribution of income in the rural and urban areas. According to RBI Survey of assets of rural and urban households for the period July 1991-1992, it was found that in rural areas, 27% of the households owning less than 20,000 worth assets accounted for 2.4% of total assets. A leading cause for concern with regard to economic development is to ensure continued growth and justice through better distribution of national wealth produced in the country.

Subsequently, most of our Indian population suffers from a poor quality of human capital. Though India is a labour rich country, the mass labour forces are illiterate, lack proper skill and often suffer from hunger and malnutrition. A minimum education is required to acquire basic skills; however, the illiteracy rate in rural areas is extremely high because of various sociological, superstitious and conservational reasons. Under the UNDP, countries have been ranked on the basis of Human Development Index or HDI where this index is based on life expectancy, adult literacy and various other qualitative factors. India ranked 136th (2012) in this list. It is very worrying to see India at such a position, which only depicts that the quality of human capital is very inferior.

The quality of health and nutrition influences the economic development of a country by raising the level of productivity, efficiency and intelligence of a community. The Global Health Index or the GHI has ranked India 103rd out of 119 countries, which is a very poor score. More than 30% of Indian children suffer from severe malnutrition and live in urban or rural slums. Living under these extremely unhygienic sanitary conditions, like open drainage or depository of fecal matter everywhere also gives rise to various problems such as the risk of contracting fatal diseases.

Hence the growth and development of a nation, or a country’s overall economic progress is not only analysed by the quantitative indicators but also qualitative ones. There is an immediate need for India to improve in both its qualitative as well as quantitative aspects. These were only a few major causes which highlight the reasons as to why India is still a developing country. Social evils like discrimination, religion based politics, superstition, gender based biasness etc further abstain us from reaching our economic goals. Now that our economy is going through a recessionary phase, the government is taking various measures to improve business conditions as many industries are going through severe loss. However, these are all facets of the supply side of the problem, whereas the key issue is the demand aspect. People are not willing to purchase cars or electronic devices because they don’t have money, as most Indians are severely unemployed. The government should hence take measures to increase the employment and income levels of the people, thereby undertaking proper policy measures to this effect, and what we can do is hope India comes out of this terrifying phase as soon as possible.

Picture Courtesy- Financial Express



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