Economy of India
Delhi Police Exams - GK Section
Introduction to Indian Economy
An economy refers to the system of production, distribution, and consumption of goods and services in a country. It determines how resources are allocated and how wealth is distributed among people.
Trick: “Economy = Earning + Consuming + Managing resources.”
Types of Economy
| Type | Meaning | Example Countries | Key Features |
|---|---|---|---|
| Capitalist Economy | Ownership of resources is private; decisions by market forces | USA, UK | Profit motive, market freedom |
| Socialist Economy | Resources owned & controlled by the government | Former USSR, Cuba | Central planning, no private property |
| Mixed Economy | Combines both private & public sectors | India | Government + Private partnership |
Memory Trick: Capitalist = Company Rule, Socialist = State Rule, Mixed = Both Rule.
India follows a Mixed Economy – Both government and private sector play vital roles.
Features of the Indian Economy
- Mixed Economy – Coexistence of public and private sectors.
- Agricultural Dependence – About 40% of population still engaged in agriculture.
- Developing Economy – Moderate per capita income, rural dominance.
- High Population Growth – Puts pressure on resources.
- Planned Development – Guided by Five-Year Plans (till 2017).
- Service Sector Dominance – Contributes over 50% of GDP.
- Unequal Income Distribution – Wide gap between rich and poor.
Trick: MAPS-UP → Mixed, Agriculture, Population, Service, Unequal, Planned.
Economic Planning & Five-Year Plans
Economic Planning is systematic resource allocation to achieve development goals.
| Plan Type | Period | Highlights |
|---|---|---|
| 1st Plan (1951–56) | Focus on Agriculture | “Community Development” |
| 2nd Plan (1956–61) | Focus on Industry | Mahalanobis Model |
| 3rd Plan (1961–66) | Self-reliance, defense | Drought & war failures |
| 4th Plan (1969–74) | Stability & growth | “Garibi Hatao” slogan |
| 5th Plan (1974–79) | Poverty removal | Bank nationalization |
| 6th Plan (1980–85) | Focus on energy & infrastructure | Ended planning gap |
| 8th Plan (1992–97) | Economic reforms | LPG Policy 1991 |
| 12th Plan (2012–17) | Inclusive growth | Last Five-Year Plan |
Trick: 1–Agri, 2–Industry, 3–Defense, 4–Garibi Hatao, 5–Poverty End.
After 2017: Five-Year Plans replaced by NITI Aayog’s Three-Year Action Agenda.
Objectives of Economic Planning
- Rapid economic growth
- Reduction in inequality & poverty
- Self-reliance
- Employment generation
- Modernization of economy
- Regional balance
Trick: GIRMER → Growth, Inequality, Reliance, Modernization, Employment, Regional.
Role of Agriculture, Industry & Service Sectors
| Sector | Role in Indian Economy |
|---|---|
| Agriculture | Provides food, raw material, employment (40% workforce) |
| Industry | Manufactures goods, adds value, creates jobs |
| Services | Banking, IT, Transport, Education – drives over 50% of GDP |
Trick: A-I-S = Agriculture → Industry → Service = Backbone of Economy.
Sectors of the Economy
| Sector | Basis of Classification | Examples |
|---|---|---|
| Primary | Extraction of natural resources | Agriculture, Fishing, Mining |
| Secondary | Manufacturing & industrialization | Steel, Textile, Cement |
| Tertiary | Services & trade | Banking, IT, Transport |
Trick: Primary = Produce, Secondary = Shape, Tertiary = Serve.
Comparative GDP Share (Approx.)
| Sector | 1950 | 2024 | Change |
|---|---|---|---|
| Agriculture | 55% | 17% | ↓ |
| Industry | 15% | 29% | ↑ |
| Services | 30% | 54% | ↑↑ |
India shifted from agrarian to service-based economy.
PYQs (Delhi Police, SSC & State Exams)
India has which type of economy?
A) Capitalist B) Socialist C) Mixed D) Traditional
Show Answer
C) Mixed
The first Five-Year Plan focused on —
A) Industry B) Agriculture C) Transport D) Defense
Show Answer
B) Agriculture
Which Five-Year Plan introduced the “Garibi Hatao” slogan?
A) 2nd Plan B) 3rd Plan C) 4th Plan D) 5th Plan
Show Answer
C) 4th Plan
Who is known as the father of Indian Planning?
A) Jawaharlal Nehru B) M. Visvesvaraya C) P.C. Mahalanobis D) Dadabhai Naoroji
Show Answer
C) P.C. Mahalanobis
Which sector contributes the maximum to India’s GDP?
A) Agriculture B) Industry C) Services D) Mining
Show Answer
C) Services
The Planning Commission was replaced by NITI Aayog in —
A) 2013 B) 2014 C) 2015 D) 2016
Show Answer
C) 2015
The term “LPG Reforms” refers to —
A) Liberalization, Privatization, Globalization B) Loan, Policy, Grant C) Land, Property, Growth D) Law, Planning, Governance
Show Answer
A) Liberalization, Privatization, Globalization
Which Plan period introduced economic liberalization in India?
A) 7th Plan B) 8th Plan C) 9th Plan D) 10th Plan
Show Answer
B) 8th Plan (1992–97)
Which sector is also known as the “Service Sector”?
A) Primary B) Secondary C) Tertiary D) Quaternary
Show Answer
C) Tertiary
Which institution currently prepares India’s development agenda?
A) Planning Commission B) NITI Aayog C) RBI D) Finance Commission
Show Answer
B) NITI Aayog
Quick Comparison Tables
Types of Economy
| Capitalist | Socialist | Mixed (India) |
|---|---|---|
| Private ownership | Government ownership | Both sectors coexist |
| Profit-driven | Welfare-driven | Balanced growth |
| USA | USSR | India |
Sectors by Economic Function
| Sector | Function | Examples |
|---|---|---|
| Primary | Extraction | Agriculture, Fishing |
| Secondary | Processing | Industry, Manufacturing |
| Tertiary | Services | Banking, IT, Transport |
Planning Highlights
| Plan | Focus Area | Key Event |
|---|---|---|
| 1st | Agriculture | 1951–56 |
| 2nd | Industry | 1956–61 |
| 4th | Garibi Hatao | 1969–74 |
| 8th | Reforms | 1992–97 |
| 12th | Inclusive Growth | 2012–17 |
Mnemonic to Remember Planning Order: “Aunt Isha Defended Garibi, Reforms Inclusive” → 1st (Agri), 2nd (Industry), 4th (Garibi), 8th (Reforms), 12th (Inclusive).
Final Concept Recap
- India = Mixed Economy
- Planning began = 1951
- Last Five-Year Plan = 12th (2012–17)
- NITI Aayog established = 2015
- Largest GDP share = Service Sector
One-Line Memory: “India’s economy mixes planning, reforms, and services — powered by people.”
Master Indian Economy for Delhi Police Exam!
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