The Indian economy is described as a mixed economy, where both the government and private players take part in production. Understanding how the economy is structured, its sectors and its major turning points gives a strong foundation for every other economics topic in competitive exams.
Type and Structure
- India follows a mixed economy model, combining features of capitalism and socialism.
- The economy is divided into three sectors: primary (agriculture), secondary (industry) and tertiary (services).
- Today the services sector contributes the largest share of India's GDP, while agriculture supports the most people.
Sectors Explained
- Primary sector - farming, fishing, mining and forestry; uses natural resources directly.
- Secondary sector - manufacturing and industry; turns raw materials into goods.
- Tertiary sector - services like banking, transport, IT and trade.
- A quaternary sector (knowledge services) is also sometimes mentioned.
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Planning and Reforms
- After independence India adopted Five Year Plans from 1951 for planned development.
- In 1991, facing a balance of payments crisis, India launched the LPG reforms - Liberalisation, Privatisation and Globalisation.
- The reforms were introduced by Finance Minister Dr Manmohan Singh under PM P. V. Narasimha Rao.
- NITI Aayog replaced the Planning Commission in 2015.
Important Terms
- GDP - total value of goods and services produced within the country.
- Per capita income - national income divided by population.
- Inflation - a general rise in prices over time.
Quick Revision Points
- India = mixed economy.
- Three sectors: primary, secondary, tertiary.
- Services contribute the largest share of GDP.
- Five Year Plans began in 1951.
- LPG reforms started in 1991.
- Reforms led by Manmohan Singh under PM Narasimha Rao.
- NITI Aayog replaced the Planning Commission in 2015.