India will have achieved 100 years of independence by 2047. By then, India will be working to become a developed economy, which will require obtaining a minimum per capita income of $13,000.
Economic growth: the British period
- Poor economic situation: It is not frequently appreciated how poorly India’s economy developed throughout the first half of the 20th century when it was ruled by the British. India’s yearly growth rate throughout the five decades was only 0.89%, according to one estimate.
- Income per capita increased by a negligible 0.06%, outpacing the population’s rise of 0.83%. It is not unexpected that policymakers’ top priority immediately following independence was growth.
After Independence
India’s early development strategy included these four components:
- Increasing the rate of savings and investment;
- Prevalence of state intervention;
- Import substitution; and
- Domestic capital goods production
- Growth that was low up until 1970: India’s average growth rate up until the end of the 1970s was 3.6%. With a 2.2% increase in population, the per capita income growth rate was incredibly low at 1.4%.
- Social indicators have improved, including life expectancy and the literacy rate, which are both important health and social indicators.
- The green revolution’s success After the Green Revolution, there was an advancement in agriculture, however initially India had to rely heavily on the concessional imports of food grains.
- Industrial base widened: Over time, the industrial base grew. India developed the ability to manufacture a wide range of products, including steel and machinery.
- Unsustainable fiscal policy: Despite numerous plans, actual growth lagged behind expectations. In the 1980s, the Indian economy did expand by 5.6%. However, a rapid worsening of the fiscal and current account deficits also occurred at the same time, and the economy experienced its greatest crisis in 1991–1992.
Statistics of Economic Expansion following-1991
- Rapid economic expansion: From 1992–1993 to 2000–2001, GDP at factor cost increased by 6.20% yearly. It expanded by 7.4% between 2001-02 and 2012-13, and by 6.7% between 2013-14 and 2019-20.
- Period of sustained high growth: The highest performance was between 2005–2006 and 2010–2011, when GDP expanded by 8.8%, clearly demonstrating what India’s potential growth rate was. This rise represents India’s highest over a sustained period of five to six years. This was true despite the fact that the 2008–2009 global financial crisis fell during this time frame.
- Rising investment rate: The savings rate rose in lockstep with the rise in investment. With an average of 1.9%, the current account deficit in the Balance of Payments (BOP) remained small.
- Growth story suffers setback after 2011–12: After 2011–12, the growth story experienced a setback. According to the 2004-05 series, the growth rate decreased to 4.5% in 2012-2013. Since then, there have been ups and downs in the growth rate. In 2019–20, the growth rate reached a 3.7% level.
Future Growth
- Maintaining a continuous growth rate is the first and most important responsibility. According to calculations, India’s economy would significantly change if it could sustain a 7% growth rate for at least the next two decades. India’s economy may be on the verge of becoming developed.
- Maintaining the incremental capital output ratio: India may easily reach a 7% growth rate if it keeps the incremental capital output ratio at 4, which reflects how effectively we utilise capital.
- It is necessary to raise investment: Increasing investment depends on a variety of variables. It’s important to establish and maintain a favourable investment climate.
- Public investment should increase, but private investment—both corporate and non-corporate—should account for the majority of investment. On this, a sound financial and fiscal system depends. It is impossible to overstate the significance of price stability in this situation.
- India must accept the new technologies that have already appeared and those that will in the future. Its growth plan must be multifaceted.
- India needs a robust export sector. It also needs a robust manufacturing sector. It is a performance evaluation. India also needs a robust manufacturing industry. This sector’s organised portion must expand as well.
- Enhanced social safety nets: India must enhance its social safety net system as output and income rise. Equity is necessary for sustainable growth.
@the-end
India must continue to grow in order to accommodate its people. To boost economic growth, the government has implemented significant structural reforms and policy initiatives including GATI-SHAKTI. These are positive advances, and more of these liberalising initiatives ought to be supported.