Indian Economy till 2008 and after 2008

At the time of Independence, India’s accounted for only three per cent of the world’s GDP, or about Rs 2.7 lakh crores. Per-capita income figures from 1947 are vague but according to some estimates, India’s share of total world income fell to as low as 3.8 percent. India had a population of 340 million and its literacy level was also alarmingly low pegged at around 12 per cent. The abject poverty and sharp social differences had cast doubts on India’s survival as one nation.

After India gained independence from colonial rule in 1947, the process of rebuilding the economy started. The objective of India’s development strategy has been to establish a socialistic pattern of society through economic growth with self-reliance, social justice, and alleviation of poverty. These objectives were to be achieved within a democratic political framework using the mechanism of a mixed economy where both public and private sectors co-exist.

The first Prime Minister of independent India, Pandit Jawaharlal Nehru’s development model envisaged a dominant role of the state as an all-pervasive entrepreneur and financier of private businesses. The Industrial Policy Resolution of 1948 proposed a mixed economy. In 1950, India set up the Planning Commission to oversee the entire range of planning, including resource allocation, implementation, and appraisal of the five-year plans. The five-year plans were centralized economic and social growth programmes modeled after those prevalent in the USSR. The first five-year plan was implemented in 1952, which largely focused on agriculture, the creation of irrigation facilities, the construction of dams, and the laying of infrastructure. From 1951 to 1979, the Indian economy grew at an average rate of about 3.1% per year.

Green Revolution:

In the year 1965, the government of India launched the Green Revolution with the help of a geneticist, now known as the father of the Green Revolution (India) M.S. Swaminathan. The Green Revolution in India mainly emphasized food grains such as wheat and rice. During the Green Revolution movement, India was converted into a modern industrial system by the adoption of technology, such as the use of high-yielding variety (HYV) seeds, mechanised farm tools, irrigation facilities, pesticides, and fertilizers. The green revolution in India mainly emphasized food grains such as wheat and rice. The movement of the Green Revolution was a great success and changed the country’s status from a food-deficient economy to one of the world’s leading agricultural nations.

White Revolution:

Father of the White Revolution in India is Verghese Kurien popularly known as the Milkman of India. The White Revolution or Operation Flood was started by the Indian Government to increase milk production, sales of dairy products, and their consumption.  The programme was launched on 13 January 1970. Operation Flood became the world’s largest dairy development program and a landmark project of India’s National Dairy Development Board (NDDB). The Green Revolution staved off famine by raising crop yields dramatically, and the white revolution – “Operation Flood” – turned India into a self-dependent nation in milk production and the world’s largest milk producer.

The period from 1950-1980 was characterised by import substitution, export subsidies, and stringent restraints on technology and investment cooperation. Substantial controls on capacity expansion and licensing requirements for manufacturing industries were also imposed during this period.

Prime Minister Indira Gandhi returned to power in 1980 after the Janata Party government, riddled with inherent contradictions, unraveled. Gandhi, a left-leaning populist until the 1970s initiated big-ticket economic reforms to secure an International Monetary Fund loan. The post-1980 period featured several pro-business reforms amid the realisation that the controlled regime was not delivering the expected results. These policy changes included import liberalisation, export incentives, exchange rate policies, and expansionary fiscal policy. The sixth five-year plan (1980-85), in essence, pledged to undertake a string of measures aimed at boosting the economy’s competitiveness. This meant the removal of price controls, initiation of fiscal reforms, a revamp of the public sector, reductions in import duties, and de-licensing of the domestic industry, or in other words ending the licence Raj.

But, during the late 1980s, India relied increasingly on borrowing from foreign sources, which led to a balance of payments crisis in 1990. The signs pointing to India’s 1991 economic crisis, its worst ever, were long evident. The country, for the first time, had to sell 20 tonnes of gold to investment bank UBS on 30 May that year to secure a $240 million loan. It pledged gold three more times after that sale, shipping 46.8 million tonnes of the yellow metal to secure $400 million in loans from the Bank of England and the Bank of Japan. On 1 July 1991, the Reserve Bank of India lowered the value of the currency by 9%, and then by 11% just two days later. This was when the economy was facing its worst crisis, and the country’s foreign exchange reserves could pay for only three weeks of imports. A devaluation is no longer a real option for governments and policymakers as exchange rates are determined by markets. Currency value is now calibrated by the central bank. All this gold was repurchased by December of that year. Prime Minister Narasimha Rao-led government with Manmohan Singh as finance minister took over on 21 June 1991 and launched a raft of economic reforms, including the dismantling of the license Raj.

Dr.Manmohan Singh became Prime Minister of India in 2004. Prime Minister Manmohan Singh, along with his Finance Minister, P. Chidambaram, presided over a period where the Indian economy grew with an 8–9% economic growth rate. Annual average GDP growth rate when Dr. Manmohan Singh was Prime Minister: 8.1%. In 2007, India achieved its highest GDP growth rate of 9% and became the second fastest-growing major economy in the world.

Indian Economy during 2008-2024

In the first two quarters of 2008- 09, the GDP growth was 7.8 and 7.7 per cent respectively. The growth fell to 5.8 per cent in the third and in fourth quarters of 2008-09 (compared to 9.3 and 8.6 per cent in Q3 and Q4 of 2007-08). From 2010, India has risen from the ninth-largest to the fifth-largest economy in the world by nominal GDP in 2019 by surpassing the UK, France, Italy and Brazil.

The growth rate in per capita income is estimated at 5.2 per cent during 2011-12 as against 6.4 per cent during 2010-11. 13. GDP at factor cost at current prices in the year 2011-12 is estimated at Rs. 82,32,652crore, showing a growth rate of 15.0 per cent over the Quick Estimates of GDP for the year 2010-11 of Rs.71,57,412 crore, released on 31st January 2012.14.     The GNI at factor cost at current prices is now estimated at Rs. 81,48,952 crore during 2011-12, as compared to Rs. 70,78,512 crore during 2010-11, showing a rise of 15.1 per cent.15.     The per capita income at current prices during 2011-12 is estimated to have attained a level of Rs. 60,603 as compared to the Quick Estimates for the year 2010-11 of Rs. 53,331, showing a rise of 13.6 per cent. (Source: Press Information Bureau).

In the fiscal year 2012-13, the economic growth rate hit a new decade low of 4.5% as construction and mining faced a slowdown. India’s GDP, during 2013–14, grew and marginally improved to 4.7 per cent as compared to 4.5 per cent in 2012–13. However, the industry continued due to deceleration in mining and quarrying, and a disappointing performance of the manufacturing sector, with growth averaging 0.2 per cent per annum in the past two years. India started recovery in 2013–14 when the GDP growth rate accelerated to 6.4% from the previous year’s 5.5%. The acceleration continued through 2014–15 and 2015–16 with growth rates of 7.5% and 8.0% respectively. For the first time since 1990, India grew faster than China which registered 6.9% growth in 2015.

India was the world’s tenth-largest economy in 2014. With 3.7 trillion, India is currently the fifth largest economy after the US (26.8 trillion), China (19.3), Japan (4.4), and Germany (4.3). The gross domestic product (GDP) growth estimate of 7.1% in 2016-17 is lower than the 7.6% growth in 2015-16. The fall in growth rate may be attributed to slower growth in the manufacturing and construction sectors. The Indian economy reached its slowest pace in 2017 the four years since the Narendra Modi government took office, as economic activity was hit by the twin blows of demonetization and implementation-related issues of the goods and services tax (GST). Real GDP or GDP at constant (2011-12) prices for the year 2017-18 is estimated at Rs.130.11 lakh crore showing a growth rate of 6.7 percent over the First Revised Estimates of GDP for the year 2016-17 of Rs.121.96 lakh crore, released on 31st January, 2018. Nominal GDP grew by 7.8% compared with the provisional estimate of 7.2%, according to data by the National Statistical Office. For 2018-19, GDP growth was revised to 6.5% from the earlier estimate of 6.1%.

India’s gross domestic product (GDP) growth in 2019-20 was revised to 4% from 4.2% estimated earlier, according to data released by the Ministry of Statistics and Programme Implementation. Crumbling in the GDP during 2019-20 can be primarily accounted for by the manufacturing sector, which contracted by 2.4% during the year (as compared to an average annual growth rate of 7.4% between 2012-13 and 2018-19).

India’s Gross Domestic Product (GDP) is expected to moderate sequentially to 6.0% YoY in Q3 FY2024, according to credit rating agency ICRA. The moderation is attributed to the industrial and agricultural sectors, with a slowdown in government expenditure and an uneven monsoon impacting GDP growth.

As per the latest Forbes report, India is one of the top 5 GDP countries in the world. The US, China, Japan, Germany, and India, respectively, hold those positions in 2024 as per GDP data.

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