The Indian economy, known for its rapid growth, has seen substantial changes since gaining independence. The Indian economy's transition from shambles to a strong economic force was challenging. Given the lengthy history of the Indian economy spanning 77 years, it is crucial to familiarize oneself with a concise overview of its economic past.
India to become third largest economy by 2031
With a GDP worth $3.7 trillion, India is presently ranked as the fifth largest economy globally, following the US, China, Japan, and Germany. It is anticipated that India's per capita income will increase, reaching $4,500 by 2031, enabling the country to achieve upper-middle-income status by the same year. Some reports suggest that by fiscal 2025 to 2031, the Indian economy will approach the USD 7 trillion mark and become the third largest economy globally. Our country is likely to surpass Japan & Germany to emerge as 3rd largest economy in 5 years.
7 Major highlights of Indian Economy (1947-2024)
1. Re-Building an Economy - 1947
In order to comprehend the state of the Indian economy in 1947 (pre-independence), we must initially examine its status prior to gaining independence. By 1952, India's share of the global economy had dropped significantly from 22.6% in 1700 to just 3.8%. Following Independence, the Indian government's funds were depleted, prompting the need for a new beginning. The country's initial finance minister, R.K. Shanmukham Chetty, shifted attention towards import substitution industrialisation and establishing government-operated public sectors.
Because of the absence of big private industries, the goal was to hire as many workers through governmental sectors as feasible. They also began to pay careful attention to heavy industries. In 1969, India nationalized 14 banks and the GDP increased to INR 5,844.8 crores.
2. Green Farming Revolution - 1965
Following independence, the Green Revolution was crucial in driving India's agricultural and economic progress. A well-known fact is that the majority of India's population is linked to farming, however, in 1965, with Lal Bahadur Shastri at the helm, agriculture in India underwent industrialization. M.S Swaminathan oversaw the implementation of a policy that included the distribution of HYV seeds and improved agricultural tools like tractors, pesticides, fertilizers, and irrigation methods. This led to a significant 70% rise in farmers' earnings and had a positive impact on agricultural industries, especially in Punjab, Haryana, and Uttar Pradesh.
3. Growth of the private industry - 1980
In the 1980s, the government was working on creating strategies to boost the country's employment rates. India was rapidly turning into a country with an increasing population, yet the rates of employment were not increasing at the same pace. This posed a major obstacle to India's growth post-independence. The government's stance towards the private sector eventually shifted, leading to the relaxation of specific regulations.
Gradually, the economy of the nation began to expand. From 1980 to 2002, it experienced an annual growth rate of 6%, positioning it as one of the top-performing economies for a period exceeding two decades. Simultaneously, in order to control the annual population increase of 2.2%, the government initiated initiatives such as the "Hum do humare do" campaign.
4. Introduction of Economic Liberalisation (LPG)
LPG (Liberalisation, Privatisation, and Globalization) did not simply begin as a great plan of the government. Chandra Shekhar Singh became the Prime Minister in 1990 when he took the oath of office. During that period, India was facing a fiscal deficit caused by inadequate economic policies. The reservoirs had no water, and the IMF and World Bank were involved.
The government used its gold reserves as collateral security with no other option. It airlifted 47 tonnes of gold to the Bank of England and 20 tonnes to the Union Bank of Switzerland. Finally, the Chandra Shekhar government collapsed, and P.V. Narasimha Rao was sworn in as Prime Minister. He roped in Dr. Manmohan Singh as Finance Minister, which changed the course of the Indian economy.
The LPG policy opened India's doors to foreign investors and abolished the 'License Raj.' Tariffs and interest rates were reduced, and the public monopoly eventually ended. From the global perspective, it was a perfect opportunity as India had a growing youth population, a good section of the population was fluent in English, and India promised considerably cheap labour. Investments started to pour in. The maximum number of companies set shop in Bangalore under the governorship of S.M. Krishna, and it soon became known as the Silicon Valley of India.
5. Great Recession - 2008
The LPG garnered tremendous success, and the Indian economy started proliferating—until 2008 when things went down south. Although India did not face the major brunt, it was a wake-up call. The IT industry, a golden ray in India's growing structure, lay off nearly 5 lakh employees. Also, the automobile sector cut its employment by 4.79%, the textile industry by 1.29%, and the jewellery industry by 11.9%. It made the government realise that India depended heavily on foreign investment, and they would have to start setting the base for more domestic firms.
6. Demonetisation - 2016
8th November 2016 is probably the most remembered demonetisation date in India. Prime Minister Narendra Modi had declared in a television broadcast that Rs.500 and Rs.1,000 notes would cease to be legal tender. He also announced the issuance of the new Rs.500 and Rs.2,000 banknotes.
Demonetisation in India has taken place three times till now, namely in the years of 1946, 1978 and 2016. With demonetisation of 2016, various impacts were seen in India over the past few years on the economy and GDP. There are various merits and demerits of Demonetisation seen over the years. However, the Supreme Court and RBI supporting demonetization have made the decision a positive thought.
Demonetisation policy had three major aims
Curbing the circulation of black money
Putting a full stop to the funding of terrorist groups and all unlawful activities
To make India a digital and cashless economy
7. Pandemic - 2020, 2021, & 2022
The latest inclusion to a very interesting economic history is the COVID-19 pandemic. What started as the Flu (Corona Virus) that would not last for more than a few weeks extended its paws over a year. As the nation grappled with the lockdown, the second and third waves of the virus only worsened the situation. It tested the patience and capacity of the economies in no way one could imagine.
Meanwhile, the broad public trust and confidence that Prime Minister Narendra Modi enjoys has certainly helped the country in its fight against the COVID-19 pandemic crisis. His government has taken a multi-pronged approach to effectively combat the pandemic. India successfully handled the world's largest vaccination programme covering the entire length and breadth of the country. India provided vaccine to the other nations.
India under the leadership of Modi has fought the most successful battle against coronavirus. But almost 400 million people lost their jobs in 2020. Many industries, such as travel and tourism, hospitality, transport, textile, etc., faced setbacks. From an economic perspective, the pandemic washed the growth charts for India and the world. But the comeback is always greater than the setback and with the onset of 2022, the vaccination brought in a hopeful zeal among the people and the business to revamp.
