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Evolution of Indian Economy (India’s growth story)

  • Categories
    Economy: Unlocking India’s future
  • Published
    23rd Mar, 2022

Introduction:

As India is going to be commemorating the 75th year of independence this year, it's relevant to look into the path the Indian economy has taken and how this journey has helped India to reach its present state. The evolution of the Indian economy has seen its share of ups and downs, economic crisis to double-digit growth and now eyeing towards becoming a $ 5 trillion economy. The purpose of this discussion is to analyse how much has India really achieved in the last 74 years in fulfilling the aspirations on which it was founded.

State of the Economy at the Time of Independence:

  • The ruthless exploitation under British colonial rule completely devastated India’s economy. India’s population was subject to frequent famines, had one of the world's lowest life expectancies, suffered from pervasive malnutrition and was largely illiterate. Cambridge historian Angus Maddison’s work shows that India's share of the world income went from 27% in 1700 AD (compared to Europe's share of 23%) to 3% in 1950.

India’s economic model: the state’s primacy over individual enterprise

  • Prime minister 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. Earlier, the Bombay Plan, proposed by eight influential industrialists including J.R.D Tata and G.D. Birla, envisaged a substantial public sector with state interventions and regulations in order to protect indigenous industries. The political leadership believed that since planning was not possible in a market economy, the state and public sector would inevitably play a leading role in economic progress.

India After Independence:

  • After India got independence from colonial rule in 1947, the process of rebuilding the economy started. India went for centralized planning. The Five-Year Plans which successfully transformed the erstwhile USSR were made a tool for development.
  • The first five-year plan for the development of the Indian economy came into implementation in Being largely an agrarian economy, investments were made in the creation of irrigation facilities, construction of dams and laying infrastructure. Due importance was given to the establishment of modern industries, modern scientific and technological institutes, development of space and nuclear programmes.
  • However, despite all efforts on the economic front, the country did not develop at a rapid pace largely due to lack of capital formation, cold war politics, defence expenditure, rise in population and inadequate infrastructure.
  • From 1951 to 1979, the economy grew at an average rate of about 3.1 per cent a year in constant prices, or at an annual rate of 1.0 percent per capita. During this period, the industry grew at an average rate of 4.5 percent a year, compared with an annual average of 3.0 percent for agriculture.

EVOLUTION OF INDIAN ECONOMY-AFTER INDEPENDENCE:

Five-Year Plans and setting up of Planning Commission

  • Five-Year Plans (FYPs) were centralised economic and social growth programs. Joseph Stalin, president of the erstwhile USSR, implemented the first Five-Year Plan in the late 1920s. India too followed the socialist path but here the planning was not as comprehensive since the country had both public and private sectors. The planning in India was only about the public sector. The first Five-Year Plan was launched in 1951. The idea was to plan public spending for equitable growth rather than leaving expenditure to the market forces.

    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. India initiated planning for national economic development with the establishment of the Planning Commission.

  • The aim of the First Five Year Plan (1951-56) was to raise domestic savings for growth and to help the economy resurrect itself from colonial rule. It was based on the Harrod-Domar model that sought to boost economic growth through higher savings and investments. The plan was a success, with the economy growing at an annualized 3.6%, beating the target of 2.1%.
  • The real break with the past in planning came with the Second Five Year Plan (Nehru-Mahalanobis Plan). The second five-year plan (1956-61) laid the foundation for economic modernization to better serve India’s long-term growth imperatives. The industrialization strategy articulated by Professor Mahalanobis emphasized the development of heavy industries and envisaged a dominant role for the public sector in the economy.

Beginning of Licence Raj:

  • On one hand, the second five-year Plan and the Industrial Policy Resolution 1956 (long considered the economic constitution of India) paved the way for the development of the public sector and on the other hand, it ushered in the licence Raj.
  • The Industrial Policy Resolution 1956 set out the establishment of a socialist pattern of society as the national objective. It also categorized industries into three groups.
  • Industries of basic and strategic importance were to be exclusively in the public sector.
  • Industries that were to be incrementally state-owned.
  • Consumer industries, which was left for the private sector.

The private sector, however, was kept on a tight leash through a system of licences.

License Raj: It refers to regulations and accompanying bureaucracy that was required to set up and run Indian businesses in India between 1951 and 1991. The Government resorted to the licensing system so that it can maintain control over industries as per the Industries Development and Regulation Act, 1951. Its objective was to regulate the industrial sector, particularly the private sector in the desired direction as per the objectives of the five-year plans.

Economic Troubles:

  • In order to quickly industrialize the Indian economy, a large reallocation of funds away from the farm sector was done. Agriculture outlay was nearly halved to 14% in the second Plan. Food shortages worsened, and inflation spiked.
  • Imports of food grains depleted precious foreign exchange reserves. Nehru’s policies are sometimes criticised on the question of excessive state involvement in the economy. On 27th May 1964, Nehru died, but, despite criticism then and in later years, he had cemented his legacy as a modernizer.
  • Lal Bahadur Shastri succeeded him as prime minister on 9th June 1964. The war with China had exposed India’s economic weakness. Chronic food shortages and price rises convinced him that India needed to move away from centralized planning and price controls. He renewed focus on agriculture, accepted a larger role for private enterprise and foreign investment, and trimmed the erstwhile Planning Commission’s role.

Green Revolution, a Shift towards Economic Revolution

  • India was on the verge of famine during the 1960s and this drew the focus of the then Prime Minister Lal Bahadur Shastri on food security. Food aid imports from the US, on which the country was reliant, were beginning to hit India’s foreign policy autonomy.
  • This was the time when geneticist M.S. Swaminathan, along with Norman Borlaug and other scientists, stepped in with high-yield variety seeds of wheat, setting off what came to be known as the Green Revolution.

M.S. Swaminathan is also an advocate for moving India towards sustainable development. He champions environmentally sustainable agriculture, sustainable food security and the preservation of biodiversity. He calls this an “evergreen revolution".

Co-operative movement: Operation Flood

  • After the success of the Green Revolution, Shastri turned his attention to the dairy sector, particularly the cooperative movement in Gujarat’s Anand, led by another visionary Verghese Kurien.
  • He helped Kaira District Co-operative Milk Producers’ Union Ltd expand its work, ushering in the White Revolution. In the years that followed, the government’s Operation Flood led to a rapid increase in milk production.
  • Self-sufficiency in the dairy sector was achieved entirely through the cooperative movement, which has spread to more than 12 million dairy farmers across the country. We can see that, decades later, Amul, the brand started by cooperative farmers in Anand, is still a market leader.

Annual Plans in place of the five-year plan:

  • As India was dragged into war, it was not in a position to commit resources over a longer period and this resulted in the suspension of five-year plans for a brief period, drawing up annual plans between 1966 and 1969 instead.
  • The war with China, the below-par growth outcomes of the third Plan, and the diversion of capital to finance the war with Pakistan had left the economy severely weakened.
  • The important monsoon rains had once again played truant during the 1966-67 season, worsening food shortages and causing a sharp spike in inflation. The constant need to import food grains or seek foreign aid also posed a serious risk to India’s political economy.

Nationalisation of Banks:

  • The 1960s was a decade that brought multiple economic and political challenges for India.
  • Two wars had caused hardships for the masses.
  • The death of Nehru and Shastri in quick succession had caused political instability.
  • The 1960s also witnessed two droughts, leading to negative GDP growth rates and double-digit inflation.
  • Foreign exchange also declined in 1964-65.
  • Rupee de-valuation had led to a general price rise.

The economic conditions led the government to devalue the Rupee from 4.76 per U.S. dollar to Rs 7.50/$ in 1966. This was done to counter India’s significant balance of payments crisis. The devaluation aimed to boost exports amid limited access to foreign exchange. Instead, it accelerated inflation and drew wide criticism.

  • In response, 14 private banks were nationalised on 20 July 1969. The main aim of the move was to accelerate bank lending to agriculture at a time when big businesses cornered large chunks of the credit flow.

The share of agriculture in credit was 2 percent in 1951 and remained unchanged in 1967. Whereas, the share of industry increased from 34 percent in 1951 to 64.3 percent in 1967.

Positives (Nationalisation of Banks):

  • Bank nationalization helped boost farm credit and lending to other priority sectors.
  • Financial savings jumped as banks were made to open branches in rural areas.

Negatives (Nationalisation of Banks):

  • Politically-influenced lending decisions led to crony capitalism.
  • These banks competed to please their political bosses, instead of focusing on project appraisals.
  • As of March 2021, the total bad loans in the banking system amounted to Rs 8.35 lakh crore.

The strategy underlying the first three plans assumed that once the growth process gets established, the institutional changes would ensure that benefits of growth trickle down to the poor. But doubts were raised in the early seventies about the effectiveness of the ‘trickle down’ approach and its ability to banish poverty.

Sixth five-year plan: Ending of Licence Raj

  • The sixth five-year plan (1980-85), 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.

Problems of Inequity-UN Human Development Index: Work of Amartya Sen

  • Amartya Sen is known and feted internationally for his work on welfare economics. His distinguished work has earned him the Nobel Prize in Economic Sciences in 1998.
  • He proved that gross national product was not enough to assess the standard of living, a finding that led to the creation of the UN Human Development Index, now the most authoritative source to compare welfare of countries.

Economic Policies during Rajiv Gandhi prime ministership:

  • Rajiv Gandhi recognized the need for economic reform if India were to shed its reliance on foreign aid and loans. He built up a team comprising politician V.P. Singh, technocrat Sam Pitroda, and market economist Montek Singh Ahluwalia.
  • The 1985-86 budget lowered direct taxes for companies and raised exemption limits for income tax. He is widely credited for ushering in the information technology and telecom revolutions in the country.

India as an IT Hub:

  • Around 1984 the IT industry saw some favourable changes when Rajiv Gandhi became Prime Minister and brought about a change in the government’s attitude towards the IT sector. His New Computer Policy (NCP-1984) offered a package of reduced import tariffs on hardware and software. A reduction of up to 60% was seen.
  • Software exports finally got the recognition of as a “delicensed industry”. This meant that exporters had now become eligible for bank finance and the industry was unrestricted from license-permit raj. Foreign companies now had the permission to set up autonomous, export-dedicated units. A project was also set up to establish a chain of software parks to provide infrastructure at costs lower than the market price. These policies eventually made the Indian IT industry what it is today.
  • The Indian education system became streamlined to create a world-class IT workforce. The emphasis on the English language also adds to the attraction. In addition, the prices offered by Indian IT firms for software development and services are also very competitive.

Fiscal Deficit-Indian Economy:

  • The high fiscal deficit has always been a critical feature of the Indian economy—an outcome of the government spending more than its income. Much of the government spending is on servicing interest cost of borrowings; defence; pensions; subsidizing food, fertilizer and fuel consumption; and schemes directed at housing, poverty, health and cleanliness.
  • A large portion of the government’s capital remains locked up in its own companies and holdings, which it is unable to sell. The Indian economy, thus, continues to suffer from good capital chasing bad, and a lack of political will to implement bold reforms.

Golden Moments that brought down the pillars of socialist India:

  • The signs leading to India’s 1991 economic crisis, 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 Bank of Japan. All this gold was repurchased by December that year.
  • The 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 Licence Raj.
  • Rupee de-valuation: 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. It was done when the Indian 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. The currency value is now calibrated by the central bank.

Redistributive economics-Manmohan Singh Government:

  • Manmohan Singh's government launched the Mahatma Gandhi National Rural Employment Guarantee Scheme in February 2006 in the 200 most backward districts, which was later expanded to cover all rural districts.
  • The scheme aimed to enhance livelihood security by providing at least 100 days of guaranteed wage employment in a fiscal year to every rural household whose adult members volunteer to do unskilled manual work.
  • The 10 years tenure of then prime minister (Manmohan Singh) was also a time of high growth (Double-digit growth was reported) and expansion of the economy as loan rates softened.

Stock Market watchdogs:

  • In April 1992, Indians were introduced to the term ‘stock market scam’ when stockbroker ‘Big Bull’ Harshad Mehta was caught using the government bond market to fund his purchases. It was a scam pegged at ₹4,025 crores and accelerated the rise of the Securities and Exchange Board of India as it exists today.
  • This and subsequent scandals led regulators to tighten the screws, bring more transparency, and use technology to eventually reform Indian markets.

Seeds of Disinvestments in Public Sectors:

  • In the Union budget for 1999-2000, then finance minister Yashwant Sinha took forward an idea he had seeded in his 1990-91 budget—disinvestment in public sector enterprises and downsizing the government.
  • Till date, the Atal Bihari Vajpayee government of which Sinha was a part remains the only one to have carried out privatization of state-owned companies in an upfront manner. Through the 1999-2000 budget, Sinha also rationalized interest rates, stoked the housing boom, and triggered India’s growth surge.
  • Later the first United Progressive Alliance government (2004-2009) led by Manmohan Singh had limited options to raise resources to manage the ever-expanding social sector budget. Manmohan Singh resorted to selling 5% to 20% stake in state-run companies through initial public offerings or secondary issues. Now answerable to public shareholders, state-run firms are focusing on improving corporate governance and becoming cost-conscious.

DIPAM: The renaming and restructuring of the Department of Disinvestment were announced in the 2016-17 budget speech. As a follow-up, the Dept of Disinvestment has been renamed as the Department of Investment and Public Asset Management or ‘DIPAM’ but it continues to function under the Ministry of Finance. It is aimed at Efficient management of the centre’s investments in equity including its disinvestment in central public sector undertakings (CPSU).

The main objectives of disinvestment in India are:

  1. To reduce the financial burden of the sick, loss-making PSUs on the Government
  2. To improve public finances
  3. To introduce competition and market discipline
  4. To fund growth, social sector welfare
  5. To encourage a wider share of ownership
  6. To depoliticize non-essential services

BSE’s Sensex- Reflection of state of Indian economy:

  • The rise of the Indian economy is best reflected in BSE’s Sensex, the 30-share benchmark index. The 30 component companies represent all sectors of the economy. From 1,955.29 points in 1991, the year India ushered in economic reforms, the Sensex touched an all-time high of 43 in October of 2021 with expectations of big-ticket reforms from a government with a massive majority driving the optimism.

India, a country so far obsessed with cash-driven gold and real estate, is slowly veering towards investing in a formal and organized equity market.

Indian companies and overseas acquisition:

  • After more than two decades of economic liberalization, the first decade of the 21st century reflected witnessing the unchained Indians.
  • Much smaller Tata Steel acquired the UK-based company Corus for an eye-popping $13.1 billion in 2007. The Aditya Birla Group’s Hindalco Industries Ltd followed this up with a $6-billion buyout of Atlanta-based Novelis in 2007. The next year, Tata Motors bought Jaguar-Land Rover for $2.3 billion. Bharti Airtel bought out Zain Africa in 2010, coughing up $10.7 billion. It was an era of multi-billion-dollar acquisitions.

2008 global financial crisis: Indian economy

  • Almost double-digit growth rates recorded during the four years from 2004-05 to 2007-08 were also a period when the global economy rode a crest, growing an average 4%-plus in calendar years 2004 to 2007.
  • Trade data since 2010 suggests that India does better than the world when world exports in goods and services are rising.
  • There are many reasons which it has led the world to believe that India survived the global problem.
  • Financial policies implemented in India after liberalization in 1991 played an important role. In India we have a strictly regulated market by the active participation of financial regulators like the Reserve Bank of India, Securities and Exchange Board of India, Ministry of Finance, Ministry of Corporate Affairs ensured that although Indian Markets have exposure to foreign players but at the same time have the lesser vulnerability to global risks.
  • Participatory Notes (P Notes) is one of the measures taken by the Government of India (GOI) to control the Foreign Institutional Investment (FII). During recession stock markets gets plummeted if foreign players pull out their investments, P Notes is the key to checking that. Many such policies had enabled GOI to run the Indian Market as a tight ship. Some of the major Indian Banks were nationalized in 1969; it facilitated GOI in forcing certain policies like high Cash to Reserve Ratio (CRR), stringent credit policy and regulation of lending rate. This control over banks has proven to be a boon to India as the recession started in the U.S. due to the burst of the Sub Prime Bubble; during this phase, to increase their profits, financial institutions started lending to the borrowers having lesser credibility at higher rates. In India, the above policies prevented Indian Banks from falling into this pitfall.

The end of Five-Year Plans: A Policy change

  • Five-year Plan which is often considered as the Nehruvian-Socialist economic approach ended with the 12th five-year plan in 2017. Within eight months of taking over as Prime Minister on 25 May 2014, Narendra Modi replaced the Planning Commission with NITI Aayog (NITI stood for National Institute for Transforming India, in line with Modi’s penchant for acronyms).
  • The Planning Commission was a Soviet-style body that drew up five-year plans for the country and played an advisory role in formulating the allocation of central funds to each state. NITI Aayog now serves as the government’s think tank, formulating medium- and long-term strategies and breaking them into year-wise plans after consultation with the states.

Why they aren't needed now?

  • It is argued that for a country as diverse and big as India, centralised planning could not work beyond a point due to its one-size-fits-all approach. Moreover, since the Planning Commission used to be controlled by the Central government, it often ended up as a tool to punish states ruled by the opposition parties when it came to allocating funds.
  • Due to the top-to-bottom approach in centralised planning, it was felt that the states needed to have greater say in planning their expenditure. The Planning Commission was seen to be imposing its diktats on states who could have better known what and how much they needed.
  • Niti Ayog:
  • NITI (National Institution for Transforming India) Aayog is a policy think-tank of the Government of India that replaced the Planning Commission on January 1, 2015. It aims at involving the states in the policy-making process to foster economic growth & development. It strives to indulge in a ‘bottom-up’ approach to envisage ‘maximum governance, minimum government, echoing the spirit of cooperative federalism. The Prime Minister of India is the ex officio Chairman of NITI Aayog.

Introduction of the Insolvency and Bankruptcy Code, 2016 (IBC)

  • Insolvency and Bankruptcy Code, 2016 is considered as one of the biggest insolvency reforms in the economic history of India.
  • This was enacted for reorganization and insolvency resolution of corporate persons, partnership firms and individuals in a time-bound manner for maximization of the value of assets of such persons.
  • The code made it possible for lenders to oust errant promoters from a company and hand it over to financially sound owners. The success of the IBC is questionable, but it has created a sense of responsibility among promoters.
  • However, there are still cases of promoters trying to retain control of their companies through the back door and others like Nirav Modi, Vijay Mallya and Mehul Choksi fleeing the country after defaulting on large loans.

Demonetisation (Overnight note-ban):

  • The announcement made by the Indian prime minister had as long-lasting and wide-ranging an effect as the one made by Prime Minister Narendra Modi on 8th November 2016. In his address to the nation, he said ₹500 and ₹1,000 banknotes, amounting to 85% of the currency in circulation by value, were no longer valid (invalid legal tender).

Positive impacts of demonetisation:

  • Increase in tax collection
  • Tackling black money
  • Impacts on Terrorism, Naxalism, and Trafficking
  • Increase in digital transactions

Goods and Services Tax (GST):

  • Hailed as one of the biggest tax reforms of the country, the Goods and Services Tax (GST) subsumes many indirect taxes which were imposed by Centre and State such as excise, VAT, and service tax. It is levied on both goods and services sold in the country.
  • The Narendra Modi government has put improving ease of doing business high on its agenda. As part of this, in July 2017, it implemented the goods and services tax.
  • India is now one of the few countries to have an indirect tax law that unifies various central and state tax laws.
  • Despite a lot of teething troubles and the increased compliance burden on companies, particularly traders and small and medium enterprises, the new system has removed tax barriers across states and created a single common market, ensuring a free flow of goods without trucks being halted at borders for payment of interstate levies.

Start-ups as a new business model:

  • A large number of start-ups have surfaced across India as young entrepreneurs want to experiment with ideas in digital payments, online retail, on-demand delivery, education, software and more.
  • The number of unicorns, or new businesses valued at over $1 billion, has also risen every year. The rise of start-ups has created a new ecosystem of the angel and venture funding, and incubators and accelerators—as well as new patterns of consumption in society.

Make in India Initiative:

  • The “Make in India” initiative is based on four pillars, which have been identified to give a boost to entrepreneurship in India, not only in manufacturing but also in other sectors.
  • New Process
  • New Infrastructure
  • New Sectors
  • New Mindset
  • Make in India" had three stated objectives:
  • To increase the manufacturing sector's growth rate to 12-14% per annum;
  • To create 100 million additional manufacturing jobs in the economy by 2022;
  • To ensure that the manufacturing sector's contribution to GDP is increased to 25% by 2022 (later revised to 2025).
  • Make in India has the potential to make India a $5 trillion economy.

Important Achievements:

  1. Food Production: Achieving “self-sufficiency” in food grains has been Independent India's biggest achievement. From receiving food aid in the 1950s and 1960s to becoming a net exporter, India has seen a turnaround in food production. The total food production, which stood at 54.92 million tonnes in 1950, rose to 305.44 million tonnes in 2020-21.

    Despite the Pandemic second wave, the estimated foodgrains production for the agricultural year 2021-22 (July-June) is 1.71 per cent higher than 310.74 million tonnes recorded in 2020-21 and the target set for the current year.
  1. Foreign Direct Investment: In the pre-liberalised ‘license raj' India, foreign investment was limited if not non-existent. In 1948, the total foreign investment in India stood at ₹ 256 crores. However, since the 1991 liberalisation, FDI has become the buzzword of India's economic story. In 2020-21, India received a record US$ 81.72 billion in Foreign Direct Investment.Gross Domestic Product (GDP): India's GDP stood at ₹ 2.7 lakh crore at Independence. 74 years on, it has reached ₹ 135.13 lakh crore. India is now the 6th largest economy in the world and is on its way to becoming the third-largest by 2031, as per Bank of America. An unmissable fact is that there has been a 10- fold increase in the GDP (at constant prices) since the reform process began in 1991.
  2. US dollar to Rupee: Contrary to a popular 2013 forward which had pegged the US $1 to ₹ 1, a US dollar was equal to ₹ 3.30 in 1947. Notably, India's rupee was pegged to the UK Pound Sterling, not the US Dollar. In March 2022, US $1 is equal to ₹ 76.
  3. Forex: India's forex reserves (In foreign currencies and other assets like gold) stood at a meagre ₹ 1,029 crores in 1950-51. In fact, India's low forex reserves played the catalytical role in kickstarting the economic reforms. With just $1.2 billion worth of forex reserves in 1991, India just had enough reserves to finance 3 weeks of imports. Three decades since the reform process began, India's forex reserves now stand at $ 622 billion (March 2022) – the world's fourth-largest.
  4. Indian Railways (route length): India already possessed one of the biggest railway lines in the early years of Independence. In Independent India, the Indian Railways has focused on unifying all rail gauges, electrification of railway lines and connecting northeast India to the mainland. Moreover, the railway line has expanded by over 14,000 kilometres, reaching 67,956 kilometres in route length by 2020.
  5. Roadways (length): Roads have expanded exponentially in the last 75 years. In 1950, as per government figures, India only had 0.4 million kilometres of roadways, which has grown to 6.4 million kilometres in 2021. This is a 16-fold rise in the total length of roadways, making India's road network the second largest in the world after the USA.
  6. Access to electricity (rural areas): Providing rural India with access to electricity has been one of the goals of India's socio-economic policymaking. According to the Ministry of Power, only 3,061 villages had access to electricity in 1950. In 2018, the Indian government announced that all of India's villages – 5,97,464 in total – had been electrified.

    A village is considered electrified if 10% of its homes and all public buildings are connected to the grid. Still, millions are living without electricity.

Indian Economy: Future Prospectus

  • India has emerged as the fastest-growing major economy in the world and is expected to be one of the top three economic powers in the world over the next 10-15 years, backed by its robust democracy and strong partnerships.
  • India is 2nd fastest-growing major economy after China. It is projected that by 2050, India’s economy will be the world’s second-largest, behind only to China.
  • Demand in the domestic market, as well as international market, is picking up, which should help the Indian economy.
  • India’s electronic exports are expected to reach US$ 300 billion by 2025-26 this will be nearly 40 times the FY2021-22 exports (till December 2021) of US$ 67 billion.
  • India is focusing on renewable sources to generate energy. It is planning to achieve 40% of its energy from non-fossil sources by 2030, which is currently 30% and have plans to increase its renewable energy capacity from 175 gigawatts (GW) by 2022.

    India is expected to be the third-largest consumer economy as its consumption may triple to US$ 4 trillion by 2025, owing to a shift in consumer behaviour and expenditure pattern, according to a Boston Consulting Group (BCG) report. It is estimated to surpass the USA to become the second-largest economy in terms of purchasing power parity (PPP) by 2040 as per a report by PricewaterhouseCoopers.

Conclusion:

  • India has not only shown greater resistance during financial crises but also during the recent pandemic that disrupted the whole global economy. It is one of the countries showing the fastest recovery too. This recovery of the Indian economy during times of crisis has displayed its robustness. It has also helped in further fine-tuning our economic policies and changing the vision of various corporate.
  • Once branded a "third world country", a term for poor developing nation-states which has now fallen into disuse, India is now among the biggest economies of the world. There's still a long way to go for India.
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