Last reviewed 30 Sept 2026 · Facts as of 30 Sept 2026 · 9 min read
A note on figures. GDP size, growth and rankings change every year. The values here are indicative for the period shown; use the latest Economic Survey and the Ministry of Statistics (MoSPI) releases for exact numbers.
What is economics?
Economics is the study of how individuals, businesses and governments use scarce resources to satisfy unlimited wants. Its central problem is scarcity and choice. Adam Smith (The Wealth of Nations, 1776) is the "father of economics"; Alfred Marshall defined it as the study of man in the ordinary business of life; Lionel Robbins as the science of scarcity; J. M. Keynes (General Theory, 1936) founded modern macroeconomics; Paul Samuelson wrote a famous textbook.
- Microeconomics studies individual units — consumers, firms, markets, prices. Macroeconomics studies the economy as a whole — national income, inflation, employment, growth.
- Factors of production: land (rent), labour (wages), capital (interest), entrepreneurship/organisation (profit).
- Basic economic problems of every society: what to produce, how to produce and for whom to produce.
- Production Possibility Frontier (PPF) shows the maximum combinations of two goods possible with given resources; the opportunity cost is the value of the next-best alternative given up.
Economic sectors
| Sector | Activity | Examples |
|---|---|---|
| Primary | extraction of natural resources | agriculture, fishing, forestry, mining |
| Secondary | manufacturing and construction | textiles, steel, cement |
| Tertiary (services) | services | banking, transport, IT, education, health, trade, telecom |
| Quaternary | knowledge-based | research, IT and information services |
- Public sector (owned by the government), private sector, joint sector, and the cooperative sector. Organised (registered, regulated) vs unorganised (informal) sector — the unorganised sector employs the large majority of workers.
- Structure of the Indian economy: the services sector contributes over half of the Gross Value Added (GVA) (about 55 %), industry about 25–30 % and agriculture about 15–18 %, while agriculture still employs the largest share of the workforce. (Approximate; check the latest figures.)
Types of economic systems
| System | Features | Examples |
|---|---|---|
| Capitalist (market) | private ownership, profit motive, price mechanism, minimum government role | USA, UK |
| Socialist (planned) | state ownership, central planning, equality | the former USSR, China (in the past) |
| Mixed | both the public and private sectors coexist; the government regulates and provides public goods | India, France |
India adopted a mixed economy with planning after independence (Industrial Policy Resolution 1948 and 1956 — the "Economic Constitution of India"), with the public sector on the "commanding heights", and moved towards a market-oriented model after 1991.
National income concepts
National income is the total value of all final goods and services produced by a country in a year.
| Term | Meaning |
|---|---|
| GDP (Gross Domestic Product) | the value of all final goods and services produced within the domestic territory in a year — by residents and non-residents |
| GNP (Gross National Product) | GDP + Net Factor Income from Abroad (NFIA) — includes the income of the nationals of the country wherever they produce |
| NDP | GDP − depreciation (consumption of fixed capital) |
| NNP | GNP − depreciation |
| NNP at factor cost = National Income | NNP at market prices − indirect taxes + subsidies |
| GVA (Gross Value Added) | value of output − value of intermediate consumption; GDP at market prices = GVA + product taxes − product subsidies |
| Per capita income | national income ÷ population |
| Personal income | income received by individuals (before personal taxes) |
| Disposable income | personal income − direct taxes |
- Gross = including depreciation; Net = excluding it. Domestic = within the territory; National = by the nationals.
- At market prices includes indirect taxes less subsidies; at factor cost excludes them. Since 2015 India measures growth by GDP at market prices (and GVA at basic prices).
- Nominal (current-price) GDP is measured at the prices of the current year; real (constant-price) GDP at base-year prices, removing the effect of inflation. GDP deflator = (nominal GDP ÷ real GDP) × 100.
- Base year: the current series has the base 2011–12 (introduced in 2015); a new series with base year 2022–23 was to be released by MoSPI in 2026 (check the current status).
- Statistical bodies: MoSPI and the National Statistical Office (NSO), which release the National Accounts (quarterly and annual GDP estimates), the Index of Industrial Production (IIP) and Consumer Price Index (CPI); the Central Statistics Office merged into the NSO in 2019; the National Statistical Commission (2006).
Methods of measuring national income
- Product (value-added) method: sum of the value added in each sector. Avoids double counting.
- Income method: sum of factor incomes — wages, rent, interest, profit and mixed income.
- Expenditure method: — consumption, investment, government spending, and net exports.
In India, the product method is used for agriculture, industry, and the income method for services; the expenditure method is used to cross-check.
Suppose GDP at market prices = 200 units; net factor income from abroad = −2; depreciation = 20; indirect taxes = 15; subsidies = 5.
GNP = 200 − 2 = 198; NNP (at market prices) = 198 − 20 = 178; NNP at factor cost (national income) = 178 − 15 + 5 = 168.
Size of the Indian economy (indicative)
India is the fifth-largest economy by nominal GDP in recent years (about 3.5–4 trillion US dollars, having passed the UK in 2022 and then approaching Japan and Germany) and the third-largest by purchasing power parity (PPP). It has been one of the fastest-growing major economies (growth of about 6–8 % in recent years). Per capita income remains in the lower-middle income category. The government's goal is "Viksit Bharat" by 2047 (a developed nation) and a 5 trillion US dollar economy. (Check the latest rank and value.)