The underdeveloped or the developing countries, as these are popularly known, inspite of their diverse structure, have some common characteristics. Todaro classifies these common characteristics into six broad categories:
Indian economy possesses all the characteristics common to underdeveloped or developing countries.
1. Low levels of living
2. Low levels of productivity
3. High rates of population growth and dependency burden
4. High and rising level of unemployment and underemployment
5. Significant dependence on agricultural production and primary products exports
6. Dominance, dependence and vulnerability in international relations
1. Low Levels of Living
In developing nations general levels of living tend to be low for the vast majority of people. These low ievels of living are manifested in the form of low incomes (poverty), inadequate housing, poor health, limited or low education, high infant mortality and low life expectancy
The GNP per capita is often used as a summary index of the relative economic well being of people in different nations.
On account of low per capita income population suffers from poor health, low education, high infant mortality and low life expectancy. In India, the life expectancy at birth was 32 in 1947 and the literacy was only 17 per cent.
According to Planning Commission estimates, India's but poverty rate was 54.8 per cent in 1973-74 and in 1993-94, the percentage of persons below poverty line being 35.97, come down to the absolute number being as high as 281.35 million.
2. Low Levels of Productivity
Throughout the developing world, levels of labour productivity are extremely low compared with those in developed countries. Low level of living and low productivity are self reinforcing social and economic phenomenon in Third World countries and as such, are the principal manifestation of, and contributors to, their development. Myrdal's well known theory of "circular and cumulative causation" in underdeveloped countries is based on the interaction between low living levels and low productivity.
Low productivity is due to low level of technology. The sharp differences in productivity between developed and underdeveloped nations can be traced to the level of technology in these countries. Productivity level in Indian economy has been low on account of backward or poor technology and this applies to all sectors of the economy - whether it is agriculture, industry or the tertiary sector.
3. High Rate of Population Growth and Dependency Burden
Fast growing population in the Third World is both a cause and effect of underdevelopment. These countries have effectively brought down the mortality rates but birth rates continue to be high due to wide spread poverty, ignorance and social and religious factors. Due to high birth rate, the dependency burden is about half of the population as against one fourth in developed countries.
The active labour force has to support almost twice as many children as it does in richer countries, population has been growing in Third World countries in the range of 2 to 3.5 per cent per annum as compared to less than 1 per cent in developed countries. In India, for instance, the rate of growth of population increased from 1.25 per cent per annum in 1951 to 2.5 per cent in 1981.
It started declining only thereafter and 1991 census recorded a growth rate of 2 per cent with children under the age 15 forming 38 per cent of the total population.
4. High and Rising Levels of Unemployment and Underemployment
One of the principal manifestations of and factors contributing to the low level of living in developing nations is their relatively inadequate and inefficient utilisation of labour in comparison with the developed nations. Current rates of open unemployment in Third World average from 10.to 15 percent and when the underemployed are added to the openly unemployed, almost 30 per cent of the combined urban and rural labour force in Third World nations is under-utilised.
With Low Developed Countries' population growing rapidly, their labour force will also be accelerating for some time to come. This means that jobs will have to be created at equivalent rates simply to keep pace with the growth of labour supply.
In India, for example, because of the high growth of population in the last decade, the growth rate in labour force will be 2.48 per cent as against 1.57 per cent growth rate in population in the year 2002.
Thus, the need for providing work opportunities for the growing labour force and also to reduce the base level of unemployment significantly, assumes great importance so as to avoid the social tensions that arise from growing unemployment and underemployment.
5. Substantial Dependence on Agricultural Production and Primary Product Export
The vast majorities of people in Third World Nations live and work in rural area. Almost 80 per cent are ruraly based compared with less than 35 per cent in economically developed countries. The proportion of labour force engaged in agriculture in less developed countries is 66 per cent compared with 21 per cent for developed nations. Moreover,
agriculture contributes about 32 per cent to the GNP of the former while it accounts for only 8 per cent of GNP of the latter.
The basic reason for the concentration of people and production in agricultural and other primary production activities in developing countries is the simple fact that for the low income levels, the first priority is for food, clothing and shelter.
Agricultural productivity is low not only because of the large number of people in relation to available land but also because in Lower Development Countries agriculture is often characterised by primitive technologies, poor organisation and limited physical and human capital inputs.
In India the predominance of the primary sector is reflected in the contribution of this sector to GDP and employment in the economy. In 1965, the contribution of primary sector to India's GDP was 47 per cent and to employment 73 per cent.
Even today, primary sector provides employment to about 65 per cent of the workforce and its contribution to GDP is 25 per cent as compared with 3 per cent of workforce engaged in primary sector in UK and 4 per cent in USA contributing about 2 per cent to their GDP. Indian economy is in transition from underdevelopment to a developing economy.
According to Michael Todaro, the phenomenon of underdevelopment needs to be viewed in a national and an international context. Economic and social forces, both internal and external, are responsible for the poverty, inequality, and low productivity that commonly characterise most Third World nations.
The successful pursuit of economic and social development will require not only the formulation of appropriate strategies within the Third World but also a modification of the present international economic order to make it more responsive to the development needs of poor nations.