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Meaning of an Underdeveloped Economy

Last updated date: 23rd Apr 2024
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An Overall Guide to an Underdeveloped Economy

For any nation across the world, an underdeveloped economy can be a major concern. It reflects the financial capability, status of citizens, their living and health conditions, and similar other things that are closely associated with the economy. This article will be of help to those who wish to know about this aspect of the economy. When someone refers to this term, it means that they are referring to the per capita income and low level of the standard of living of that particular area/ place. 


What is an Underdeveloped Economy?

The economy plays a fundamental role in every nation. There have been several countries including India which have righteously recovered from the image of the underdeveloped country by removing the problem of the underdeveloped economy in the country. Without clearing the concept of an underdeveloped economy, an individual cannot understand the struggle and hardships that occur along with this crisis. 


The common characteristics of this form of the economy are low living standard and per capita income, high rate of unemployment, excessive population growth, lack of capital and advanced infrastructure, and lack of education. These are the key features that can separate the economy into two parts which are developed and underdeveloped.


Difference Between Developed and Underdeveloped Economy

The economies that have high per capita income and support a high standard of living are referred to as developed economy and, on the other hand, economies that have low per capita income resulting in a low standard of living is referred to as underdeveloped economy. 

  • Developed Economies: 

In such an economy there is a lower rate of poverty incidence, service and industrial sectors are thriving. There are a sufficient amount of resources and technological advancement supporting a high rate of production. Most importantly, there is a minor gap between the poor and the rich. 

  • Underdeveloped Economies: 

There is a significant amount of poverty and the primary sector like agriculture is in a leading position. The resources in this form of the economy are not judiciously utilised and there is a high rate of dependency on traditional approaches which results in a low rate of production. Most importantly, there is a significant amount of difference between the rich and the poor. In such an economy, the state or the country fails to meet the necessary standard of living for the major section of a population. This leads to materialistic deprivation, misery, hunger, deterioration of health and overall living standard. 


Understanding the Concept of Underdevelopment

While talking about what is an underdeveloped economy, it is first important to understand the concept of underdevelopment. It is a relative concept as it compares the quality of life through the economy that creates the difference between a developed population and an underdeveloped population. The concept refers to the sustenance of absolute poverty which refers to the kind of poverty, where people are unable to fulfil their basic needs, like, food, clothing, shelter and similar things as such. There is a constant struggle among people to survive. 


Thus the meaning of absolute poverty is equivalent to the meaning of an underdeveloped economy. Some of the common characteristics of the underdeveloped economy are low per capita income, economic inequalities, the slow growth rate of per capita, low-productivity labour and lower level of living, rudimentary techniques of production, low rate of capital formation, lack of resource utilization and similar things as such. 


Why Choose Vedantu?

With covid-19 disrupting human life and putting a halt to almost all forms of growth, education is one thing that should not stop. And as there is no scope of offline education these days, why not choose a reliable online tutorial that can make the process of education interactive? This has been one of the major reasons why a considerable number of people around the world have chosen Vedantu as their trusted guide towards education. 


It is the only learning site, which brings professionals under one roof to enhance the process of disseminating education. From children to adults anybody can get on to the site, at any point of time to expand their horizon of knowledge. Moreover, the contents are in alignment with the syllabus, which further helps the learners extensively.

FAQs on Meaning of an Underdeveloped Economy

1. What Does a Low Volume of Foreign Trade Mean?

The understanding of the underdeveloped economy definition also involves the understanding of foreign trade and its impact on the economy. Here, we are going to discuss the low volume of foreign trade experienced in underdeveloped countries. Primary products like agricultural goods, oil, minerals, and finished products like consumer goods are some of the products that are exported in unfavourable trade terms specifically in an underdeveloped country.

2. Define an Underdeveloped Country.

When a country is characterized by mass poverty that is highly chronic and there are obsolete methods of production and social organisation, it is referred to as an underdeveloped country. In such countries resources that can fill the gap of poverty are not utilized judiciously. In a country like India, the undeveloped country is characterized by under or unutilized resources and there is a certain degree of co-existence.

3. What are the Causes of Underdevelopment?

There are a few factors responsible for an undeveloped state or countries which are listed below:

  • Lack of capital

  • Per capita income of the population is poor

  • Natural resources and manpower are underutilized

  • The dependency of rudimentary techniques of production 

  • The index of human development is also unfavourable towards growth.

4. What makes a country develop?

A very basic question that arises when we talk about development is what makes a country develop. The question is a complex one and it includes various dimensions which must be carefully analyzed. For example, a country may have extremely wealthy people but due to the income inequality, most of the country is poor. Such a country cannot be considered developed. On the other hand, countries which can provide basic services like health and education to their people are much better in this regard, providing jobs and source of livelihood are also an important indicator of development.

5. Which countries are considered developed?

The world of today has extreme inequalities which exist among the countries, there are countries where people enjoy a much superior standard of living when compared to other nations. An average American is enjoying much more resources than an average African. Western Europe, North America, Australia, Japan, and South Korea are generally considered as part of the developed world.

6. What are the traits of a developing country?

A developing country is one that faces the issues of an underdeveloped country but which has also been making constant progress in dealing with the issues of poverty and human development. India can be said to be a perfect example for a developing country as India is much backwards when compared to other developed nations but India has also been making progress when it comes to dealing with its internal issues.

7. How can the study materials along with exercise questions for the Economy be downloaded from Vedantu?

The Online resources at Vedantu can easily be accessed using 4 steps:

  • Open the Website of Vedantu on your Laptop or you can log in to the Vedantu App through your phone.

  • Search the subject of Economy along with the particular topic which you are looking for.

  • Click on Download PDF to download the solution in PDF format.

  • Enter OTP and then the solutions will be sent to your email ID.

Refer to Vedantu for free chapter-wise solutions and get free access to various other online resources and improve your learning in several folds.

8. What is the solution to making an underdeveloped or developing country into a developed one?

The history of the world has been one of extreme violence and conquest. The world is not equal and every country has had its own share of challenges. To pave the path of the future, we must understand how we have reached here. So, despite whatever challenges we may be facing, there cannot be a one size fits all type of solution as every challenge is unique in itself. The solutions to the development challenges of a country must be based on its own conditions like its demography, geological conditions, available resources, culture, etc.