Characteristics of underdeveloped economies

discussing the features of under developed or developing countries with special reference to India. helpful for school and college who try to understand the characteristics of Indian economy from the angle of developing economy.

1. Characteristics of Underdeveloped Economies _GMV_

2. Classification of Economies ON THE BASIS OF PER CAPITA INCOME : The World Bank divides the world's economies into four income groups: high, upper-middle, lower-middle, and low. The income classification is based on a measure of national income per person, or GNI per capita, High income economies : with income of $12,376 or more Upper Middle income economies : with income between $3,996 and $12,375 Lower Middle income economies : with income between $ 1,026 and $3,995 Low income economies : with income $ 1025 or less _GMV_

3. _GMV_

4. Classification of Economies ON THE BASIS OF DEVELOPMENT Underdeveloped countries Developing countries Developed countries _GMV_

5. Underdeveloped Economy The co-existence of greater or less degree of unutilized manpower. Unexploited natural resources Owing to vicious circle of poverty resources are not fully utilised Per capita income is low as compared to developed countries Techniques of production is conventional ,inefficient and orthodox There is potential of growth Developing Country (DC) is a nation which lacks industrialization, infrastructure, developed agriculture, developed natural resources, and suffers from a low per capita income as compare to developed nations. Developing countries are also called under-developed nations (UDN) _GMV_

6. Causes of Under Development: Economic Causes Market imperfection Immobile labour Ignorance of market conditions Monopolistic practices Inflexible economy Lack of capital formation Problem of population Lack of modern enterprise Technical obstacles International obstacles Noneconomic Causes Social Causes Religious Causes Political Causes Administrative Causes _GMV_

7. Developed and less developed Economy Developed Countries A developed nation is one that has a very high rank in industrial advancements, construct its economy in innovation in production and assembling rather then agri-business. A nation with more Human Development Index is viewed as a developed nation. It is not only a measures of economic development and improved GDP. Developing Countries A nation that is not yet industrialized. A country having less utilization of resources. Low Per Capita Income leads towards low GDP. Economy mostly depends upon Agricultural Sector _GMV_

8. Economic Growth Economic Development Definition Increase in the monetary growth of a nation in a particular period It refers to the overall development of the quality of life in a nation which includes economic growth Span of Concept It is a narrower concept than Economic Development It is a broader concept than Economic Growth Scope It is a uni -dimensional approach which deals with the economic growth of the nation It is a multi-dimensional approach that looks into the income and as well as the quality of life of the nation Term Short-term process Long-term process Measurement Quantitative Both Quantitative and Qualitative Applicable to Developed Economies Developing Economies Government Support It is an automatic process that may or may not require intervention from the government It requires intervention from the government as all the developmental policies are formed by the government Kind of changes expected Quantitative changes Quantitative as well as qualitative changes Examples GDP, GNP HDI, Per capita Income, Industrial Development _GMV_

9. Characteristics of Indian Economy – Developing or Under developed Economy _GMV_

10. Low Per Capita Income Per capita income = Total income / Total population In 2013, there are 182 countries, out of which only 34 are developed and remaining 148 are under developed. The average per capita income of underdeveloped economies is about $2 per day while of developed economies is $30 per day. PROF.KURIHARA, ”Low per capita income is the chief feature of less developed countries.” In the under developed countries the size of national income is low but the size of population is very high. So per capita income remains low which is the main obstacle in the way of economic development. _GMV_

11. Low Per Capita Income - Poverty An underdeveloped country is poverty-ridden. Poverty is reflected in low GNP per capita. According to the World Development Report, 1999-2000, 59.6 per cent of the world population in 1998 living in low-income economies had GNP per capita of $ 760 or less; 25.4 per cent in middle income economies had $ 761 to $ 9,360; and 15.0 per cent in high-income economies had $ 9,361 or more. The extremely low GNP per capita of low income economies reflects the extent of poverty in them. _GMV_

12. Low level of living Level of literacy, per capita calorie, housing conditions, HDI is very low. HDI is readily between 0.3 and 0.4. Human development index is a collective index prepared by united nations development programme (UNDP). It is calculated on the basis of longevity, knowledge, and level of income. It is measured on 0.1 to 1 scale. On account of low per capita income population suffers from poor health, low education, high infant mortality and low life expectancy. In India, the life expectancy at birth was 32 in 1947 and the literacy was only 17 per cent. According to Planning Commission estimates, India’s but poverty rate was 54.8 per cent in 1973-74 and in 1993-94, the percentage of persons below poverty line being 35.97, come down to the absolute number being as high as 281.35 million. _GMV_

13. Low economic performance – Low productivity Throughout the developing world, levels of labour productivity are extremely low compared with those in developed countries. Low level of living and low productivity are self reinforcing social and economic phenomenon in Third World countries and as such, are the principal manifestation of, and contributors to, their development. Myrdal’s well known theory of “circular and cumulative causation” in underdeveloped countries is based on the interaction between low living levels and low productivity. Low productivity is due to low level of technology. The sharp differences in productivity between developed and underdeveloped nations can be traced to the level of technology in these countries. Productivity level in Indian economy has been low on account of backward or poor technology and this applies to all sectors of the economy – whether it is agriculture, industry or the tertiary sector. _GMV_

14. One of the principal manifestations of and factors contributing to the low level of living in developing nations is their relatively inadequate and inefficient utilisation of labour in comparison with the developed nations. Developed country like USA, Japan, Germany engage less population in agriculture, below 10%. While underdeveloped country like India, Pakistan, Bangladesh engage more population in agriculture; more than 50% and produce less production per hectare. They follow the traditional and subsistence farming. In India, because of the high growth of population in the last decade, the growth rate in labour force will be 2.48 per cent as against 1.57 per cent growth rate in population in the year 2002. Thus the growing population leads to the fact that the labour force will also be accelerating for some time to come. This means that jobs will have to be created at equivalent rates simply to keep pace with the growth of labour supply. Low economic performance – Low productivity – Unemployment – Population Growth _GMV_

15. The average growth rate of population in underdeveloped countries is 2.1% as against 0.6% in developed countries. This is because birth rate and death rate are high in underdeveloped countries compared to developed countries. Birth rate ranges between 30-40 per thousand and death rate between 10-15 per thousand. In developed countries birth rate ranges between 10-13 per thousand and death rate between 9-10 per thousand. Thus the level of consumption in underdeveloped countries goes up and savings comes down. This leads to fall in capital formation. They are illiterate and have poor health, low quality life, low life expectancy. _GMV_

16. The latest estimate in this regard is the Rangarajan Committee Report in 2014 according to which, the poverty line should be Rs. 32 per day in rural areas and Rs. 47 in urban areas, as against the earlier estimate of Rs. 27 and Rs. 33 respectively. The Rangarajan Committee’s methodology to calculate poverty line is based on parameters like clothing, house rent, conveyance, education, adequate nourishment, average calorie requirements, protein and facts etc. a household has been considered poor if it is not able to save. The official method to estimate poverty above is the Head Count Ratio (HCR) which is calculated by diving the number of people below the Poverty Line by the total population. This is the proportion of poor in the total population. The Planning Commission has updated the poverty lines and poverty rates for 2011-12 based on the recommendations of Tendulkar Committee. Accordingly, with the Poverty Line at all India level at monthly per capita expenditure of Rs. 816 for rural areas and Rs. 1000 for urban areas in 2011-12, the poverty ratio from 37.2 percent in 2004-05 to 21.9 percent in 2011-12. POVERTY _GMV_

17. The Human Development Report estimates the Human Development Index (HDI) in terms of three basic parameters: to live a and healthy life, to be educated and knowledgeable, and to enjoy a decent economic standard of living. India’s rank in HDI is 135 out of 187 countries in 2014. There is also the inequality adjusted HDI prepared by HDR for nearly 140 countries which takes into account loss of human development due in inequality in health, education and income. _GMV_