Features of an Underdeveloped Economy

Even though most countries, including India, are today more commonly described as "developing" rather than "underdeveloped," the Class 12 syllabus retains this classical set of features because they still describe structural weaknesses found in many low-income economies.

• Low per capita income and mass poverty: average income is low, and a large proportion of the population lives below the poverty line.
• Excessive dependence on agriculture: a disproportionately large share of the workforce is engaged in agriculture, which itself is often traditional and low-productivity, compared with the small share of national income it generates.
• Low rate of capital formation: low incomes mean low savings, which in turn limits investment — a vicious circle sometimes called the low-level equilibrium trap.
• Technological backwardness: production techniques remain outdated in large parts of the economy, especially in agriculture and small-scale industry.
• Rapid population growth: a high birth rate combined with a falling death rate produces rapid population growth, which puts pressure on resources and dilutes the benefits of growth — a low per capita share of a growing pie.
• High unemployment and underemployment (disguised unemployment): especially in rural areas, where more people are engaged on land than are actually needed to produce the same output.
• Unequal distribution of income and wealth: ownership of land and capital is concentrated, so the benefits of whatever growth occurs are not widely shared.
• Low levels of literacy, health, and human development: limited access to education, safe drinking water, sanitation, and health care.
• Dualistic economic structure: a small, modern, urban-industrial sector coexists with a much larger, traditional, rural sector at a very different level of technology and productivity. …