At the time of Independence the Indian economy was stagnant and highly underdeveloped. Agriculture was the backbone of the economy but agricultural activities were undertaken through obsolete technology. Industrial sector contributed very little to gross domestic product (GDP). In order to give a direction to the economy the government initiated economic planning in the form of Five Year Plans in 1951.
Over the years the economy has witnessed increase in GDP, the composition of GDP has changed; standard of living of people has improved, and there has been upgradation in level of technology. The important features of the Indian economy are as follows:
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i. The Indian economy is a developing economy. It has not yet reached the level of economic development seen in America and Europe.
ii. The Indian economy is a mixed economy in the sense that both private sector and public sector coexist and participate in the production process.
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iii. It is characterised by high population density and population growth.
iv. About one-third of the population live below poverty line. ‘Vicious cycle of poverty’ operates in many sectors of the economy.
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v. There is high level of unemployment and underemployment. In addition, there is ‘disguised unemployment’ in the agricultural sector.
vi. The level of technology used in production process is low in many sectors. Modern technology has not been adopted in all sectors of the economy.
vii. There is a shortage of physical and economic infrastructure. Transportation (roads, railways, airlines), power (electricity, gas), and communication (telephone, Internet) have not reached all parts of the country. Even some parts of the country do not have provisions for schools, colleges, hospitals, and safe drinking-water supply.