Major Problems of Indian Economy and their Solutions

Created with Sketch.



Major Problems of Indian Economy and their Solutions

In this article, we have discussed the major problems of the Indian economy and their solutions.

1. India suffers from overpopulation

At present, the population of India is around 1.2 billion. Population is increasing at an explosive rate. Thanks to the advances in medical science and other public health measures, the death rate has been greatly reduced.

The growth of population in relation to the growth of economy is much faster resulting in the incidence of malnutrition, unhealthy conditions of living and so on.

A high birth rate accompanied by a low death rate cannot adjust population to the means of living. The population growth rate in India is still quite high compared to developed countries. For this, the rapidly growing population swallows up the increased output and our country remains economically backward.


  1. This necessitates rapid economic development to meet the requirements of an increased population.
  2. Create awareness among the people of India regarding the demerits of population explosion.
  3. Encourage people to adopt birth control methods.
  4. Educate people. Educated people are more likely to take steps to control the population.

2. There is a deficiency of capital equipment

The varied natural resources of India remain underutilized due to the deficiency of capital equipment. It may be said that vast resources like land, water, power and natural resources should be fully and at the same time properly utilized for the economic, benefit of the people at large. Under-utilization of natural resources is yet another major problem for the Indian Economy.


  1. Steps should be taken to modernize capital equipment.
  2. Private investment should be encouraged to make an investment in the capital intensive sector.
  3. Easy finance should be made available to businesses engaged in large-scale industries.

3. Inadequate revenue through taxation despite high rate.

India a large country. In India there is a great problem of securing adequate revenues through taxation and public borrowing. A large number of people live below the subsistence level. Again, a high rate of taxation discourages private incentive as well as the free flow of foreign capital.


Encourage people to opt for higher education and professional courses. This would enable them to come out of poverty trap. An increase in their earning would result in increased collection in the form of direct and indirect taxation.

4. Unemployment

The Indian economy is characterized by huge unemployment, both in rural and urban areas. Unemployment is a major problem for Indian Economy. India is basically an agricultural country. Most people are engaged in agriculture due to want of alternative occupation. A large part of the population engaged in agriculture can be removed without reducing agricultural output. This is called disguised unemployment. They should be withdrawn from agriculture with a view to increasing their marginal productivity.


  1. Educated people are more likely to secure a respectable occupation.
  2. Cottage industries should be promoted in rural areas.
  3. Industries that employ a large number of people should be encouraged.
  4. The problem of disguised unemployment can be tackled by creating better opportunities of employment.

5. Deficiency of Per capita Capital

Indian economy suffers from the problem of deficiency of per capital. People are too poor to save and invest to make for rapid economic development. As a result the per capita availability of capital like steel and energy is extremely low in India compared to developed countries.


  1. Check on excessive population growth.
  2. The natural resources of the country should be appropriately utilized, so that every section of the society can get its benefit.

6. Low per capita purchasing power

In India, the per capita real income is very low resulting into low per capital purchasing power. This is due to the poor income of the people. For this the purchasing power of the people is extremely low.


  1. The purchasing power of the people can be increased increasing the income opportunities for them.
  2. A check on the increasing trend of inflation may help to tackle the situation.

7. Lack of technical knowledge in comparison to other countries.

India has to depend on foreign countries for the supply of machinery, capital goods and technical knowledge. She export raw-materials and imports manufactured goods. The import of capital goods involves heavy cost due to higher prices. India depends too much on import which makes her economy dependable on others and affects the terms of trade.


Indian industries should either set-up their own research and development centers. They can also enter into technical collaboration with foreign partner and manufacture the finished products in India.

8. Lack of Industrialization

India is very backward in industry. A large portion of the working people are engaged in agriculture. India import a large quantity of fighter planes and defense equipment. Many of the electrical equipment of daily use are imported from other countries.


  1. Both Indian and foreign investors should be encouraged to make products in India.
  2. Industries should be encouraged to manufacture defense equipment, fighter planes, etc in India.

9. Defective Economic Infrastructure

India has defective economic infrastructure. It means that in India, there are inadequacy of the means of transport and communication, irrigation and power. They retard the economic progress of India.

Initiatives taken and solutions: 

However, attempts have been made to improve the transport and power systems. Agencies like Industrial Finance Corporation, National Industrial Development Corporation, Industrial Development Bank, Re-finance Corporation, Industrial Credit and Investment Corporation have been set up for the supply of long-term finance to the large-scale industries in India.

  1. Companies engaged in building infrastructure such as road, dams, bridges, etc. should get easy finance.
  2. Foreign financial institutions can be encouraged to invest in building the infrastructure of India.


In spite of the problems listed above, if we compare the present economic condition of our country with the pre-independence period, we find that the long spell of stagnation in Indian economy was broken after Independence of India. The present position of Indian economy, though not satisfactory, is much better than it was some 50-70 years ago. With the beginning of economic planning an era of economic development started. Economic development in India has broadly two faces Quantitative and structural. We see a spectacular progress has taken place in the line of:

  1. National income trends,
  2. Rise in per capita income,
  3. Sectoral distribution of domestic products,
  4. Stability in the occupational distribution of population
  5. Changes in land relations,
  6. Growth of basic capital goods industries
  7. Expansion in social overhead capital
  8. Progress in the banking and financial sectors etc.

As a result investment in the economy has been stepped up. We also notice the increase in agricultural and industrial production. Steps have been taken to modernize these sectors in India.

The current economic scene in India is more or less encouraging, but we are still way behind achieving full employment, poverty eradication, education for all, and industrialization.

Indian economy is a developing economy. By taking the remedial measures to tackle the economic problems, India can surely target to become a developed economy.

Leave a Reply

Your email address will not be published. Required fields are marked *

This is a free online math calculator together with a variety of other free math calculatorsMaths calculators