Indian Economy 2024: Size, Growth Rate, Key Sectors, Characteristics, Features

The Indian economy is, without a doubt, the most important aspect of our country. In this article, we will discover the features and characteristics of the Indian economy and provide insights on the key economic sectors driving India’s growth. We will also have a look at the challenges and opportunities for the Indian economy in 2024. 

What is the Indian Economy?

The activities of making, sharing and consuming commodities and services within the boundaries of India is simply known as the Indian economy. This includes areas such as 

(i) Agriculture, 

(ii) Industry manufacturing and 

(iii) Services. 

All these sectors work together towards achieving economic growth and development in the country.

Key sectors contributing to Indian economy 

With the liberalisation of the Indian economy in 1991, it has seen remarkable changes. The key economic sectors driving India's growth are: 

• Agricultural sector: Agricultural sector is the backbone of the Indian economy. Although its share in the GDP is declining, 50% of the Indian population is dependent on that. Focusing on the development of the agricultural sector, the government has undertaken a slew of initiatives such as subsidies, self-help groups like Lijjat Papad, and cooperative farming models like e-Choupal. Apart from this, the industry has been gradually shifting towards cash crops and promising industries like food processing are emerging. 
• Industry sector: After the liberalisation reforms, the industrial sector has seen a surge in growth. This is because of the encouragement of private investments including FDI, and the end of bureaucratic hurdles. Industries have seen growth, there is more autonomy and integration of modern technologies. Joint ventures and partnerships between private and public sectors are growing and diversifying the industrial landscape. 
• Services sector: In the Indian economy, the services sector has grown monumentally and constitutes 60% of the GDP. IT services, finance, banking, and business process outsourcing are the major contributors here. Local IT giants such as TCS, Infosys have gained global recognition and contribute significantly to the Indian GDP. This sector is also contributing to the demographic dividend of India by creating numerous job opportunities.  
• Food processing: Food processing is a lucrative sector due to the availability of abundant resources, large consumer base and favourable policies such as Make in India. There is a need for packages and pre-processed food due to the increasing urbanisation, large population, and disposable incomes. Since India is the second-largest producer of food grains, we have a huge potential for growth and investment in this sector. 
• Manufacturing sector: After services sector, the manufacturing sector is the second-largest contributor to GDP. Government has undertaken initiatives such as Make in India, Sagarmala, Startup India, and Dedicated Freight Corridors, alongside enthusiastic state participation, to boost the share of the manufacturing sector in the coming years.

Characteristics of Indian economy 

Now that the key sectors has been explored, let’s look at the key characteristics of Indian economy: 

• High dependence on agriculture: About 58% of our nation's population is involved in agriculture. It plays an important role in providing jobs and supporting many families. To make agriculture more productive and efficient, the government must focus on using better technology and strategic planning. 
• Increasing per capita income: Per capita income is an estimate of the amount of money earned per person in a country or geographic area. The per capita income of India has doubled from INR 86,647 for 2014-15 to INR 1,72,000 for 2022-23. 
• Expanding workforce: India has a relatively young workforce with a growing number of people who are ready to work. In both rural and urban areas, efforts are underway to create more jobs and to make the most of the available workforce.
• Efforts to distribute wealth fairly: Initiatives are being implemented to make sure the wealth is distributed evenly among the population. The primary goal is to improve everyone's living standards, particularly in rural areas. 
• Improving infrastructure: In India, the government is working towards improving the critical infrastructure such as transport, banking, communications, health, education etc. to fully utilise the country’s resources and support the overall economic growth. 

Metrics to measure position of Indian economy

GDP is the most common metric to measure the position of the Indian economy in which the total value of all goods and services produced in an economy is adjusted for inflation. Here are three main ways to look at GDP:

• Quarterly Growth at an Annual Rate: This rate shows the change in GDP from one quarter to the next and then projects that change for the whole year. For example, if there is an increase in GDP by 0.3% in one quarter, the projection for the year will be 1.2%. This also helps in spotting the short term changes in the economy.
• Year-Over-Year Growth Rate: This rate makes a comparison between one quarter and the previous year’s same quarter and assists in streamlining the seasonal ups and downs. It paints a clear picture of the economic trends for the long term. For example, when you compare the GDP of the third quarter to last year’s third quarter, it shows how much growth has been there in the economy over the past year. 
• Annual Average Growth Rate: This rate is the average of the GDP growth rates from each of the four quarters in a year and gives a steady view of the economy. For example, if the quarterly growth rates are 2%, 3%, 1.5%, and 1%, the annual growth rate will be 1.875%. 

Current position of Indian economy

India stands as the fifth largest economy in terms of nominal GDP and ranks ahead of the developed nations like Italy, France and Canada. Not only this, India is predicted to surpass Germany by 2030. Also, the main export partner of India is the United States, constituting 17% of India's all exports. Other major nations include UAE and China. India's consumer market size, ability to manufacture, untapped natural resources, and reforms in government such as foreign direct investment have made it the preferred destination for investors worldwide.

Challenges and opportunities for Indian economy

Here are some of the significant challenges and opportunities that lie ahead for the Indian economy:

• Economic growth impact: The COVID-19 pandemic led to the negative growth rate of the Indian economy in 2020. However, it recovered well in 2021 and the growth was 9%. Now the growth rate has settled at 7% and that shows India’s ability to bounce back and how strong its economic policies are. 
• Unemployment: There was an increase in unemployment due to pandemic and many businesses closed their operations. The rate of unemployment rose to 7.4% in 2020 from 5.4% in 2019. By 2012-22, it had improved to 4.1% and continuous efforts are required to create more jobs and support the workers. 
• Agriculture challenges: Although agriculture forms the backbone of India's economy, it hasn’t grown much in comparison to other sectors. The government needs to look at enhancing technology, policies, and must plan to increase the productivity and income of farmers. 
• Income differences: Inequality in the income has a direct effect on how much people can spend and invest. The Gini coefficient was 0.38 in 2019-20, which reflects a huge gap between the rich and the poor. The focus should be on formulating inclusive policies to reduce this inequality and boost spending and economic growth. 
• Infrastructure deficit: India has a large infrastructure gap, estimated at over $1.4 trillion, impacting areas like transport, energy, and healthcare. Private investment has also been low, with a decline in fixed capital formation. Investing in infrastructure can attract more private investment and drive economic growth.
• Export challenges: Global trade gets disrupted by the geopolitical issues, which affect India’s exports in different sectors like footwear, textile etc. The global market position and export performance can be improved by focussing on high-demand areas and improving trade relations.

Conclusion 

To sum up, the Indian economy has its own stumbling blocks and opportunities. Fair income distribution, developing agriculture, and creating employment are the areas of improvement to make India self-sustaining.

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