India is a major developing country. It became world’s fifth largest economy in terms of nominal GDP in 2022 surpassing United Kingdom which ruled it once for 200 years. It has come a long mile in just 75 years after independence shading it’s colonial past. India has a large population and large share of which is young working age population. It has transitioned from mostly agriculture dependent economy in 1950s to a mostly service sector dependent economy. But it’s large rural population mostly depends on agriculture which need to be modernized for a better share in nominal GDP as relative to the profession and population ratio.
PRE-LIBEBARALISATION PERIOD(1947-1991)
After independence, India’s economic policy was mostly driven by state controlled policies, often termed as dirigism. Most of the industries and institutions were controlled by government. A very much policy interference by government made the industries to perform at low pace and with less profit.
Indian government under first prime minister Mr. Jawaharlal Nehru after independence formed various policies regarding business regulation in industries, five year plans of India resembling the Soviet Union. Most of the public sector was controlled by the government. Various industries such as steel, mining, telecommunications, power plants, oil companies etc. were controlled by government in 1950s. There was such a centre control over industries that once J.R.D. Tata said- “I cannot decide how much to borrow , what shares to issue , at what price, what wages and bonus to pay, and what divident to give. I even need the government’s permission for the salary I pay to a senior executive.
In mid 1960s , during Mr. Lal Bahadur Shastri’s tenure as second prime minister, high varieties of seeds, improvisation of irrigation methods and increased use of chemical fertilizers and insecticides contributed to Green Revolution. By which, the crop productivity increased further strengthening agricultural economy. Later during tenures of Rajiv Gandhi nd V.P. Singh as prime minister in late 1980s tried to lower the interest rates working towards some benefit of industries, but those measures were insufficient for growth at large scale. Also, Rajiv Gandhi’s government was marred by various sacndals which slowed down these reform works.
POST-LIBERALISATION PERIOD(After 1991)
In the year 1991, the then government of P.V. Narsimharao including then finance minister Dr. Manmohan Singh initiated various economic reforms during the collapse of Indian economy. The major cause for downfall of Indian economy was the collapse of Soviet Union which was a major trading partner of India. There were other reasons as well such as The Gulf War, which caused a major spike in oil and fuel prices. India was facing the prospect of defaulting on it’s loans. India rushed to International Monetary Fund(IMF) for the bailout of $1.8 billion. IMF in return demanded the de-regulation of economy.
Major economic reforms taken in 1991 were reducing public monopolies , reducing tariffs and interest rates, automation of Foreign Direct Investments(FDE) in various economic sectors. But still, no government has tried to improve labour laws and farm laws due to the resistance from powerful lobbies such as trade unions and farmer unions. India has progressed as a free market substantially. Reduction of state control has effectively worked for the economic growth.
India registered a growth rate of 6.4% in 2013-14. In 2015, it registered a GDP growth rate of 6.9% which was greater than China for the first time since 1990. But later in 2016-17 & 2017-18, it decelerated, at some extent because of slowdown by Demonitisation decision and introduction of Goods and Services Tax(GST). India is regularly improving in Ease of Doing Business Index, which is also a great sign of improving free market economy.
During the COVID-19 pandemic, various rating institutions predicted recession in India. But still it managed to keep it away from recession. In the first quarter of the financial year 2022-23, the Indian economy grew by 13.5% which is a great sign of post pandemic recovery among major economies.
There are Various agencies which predict the future GDP of India. India is expected to surpass Germany in 2025 and Japan in 2028 in terms of nominal GDP to become third largest economy in the world only after US and China. A great future lies ahead for Indian economy and moreover, growth of India, a nation with great civilizational and democratic values is also in a good fortune of whole world.
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