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Indian Economy @75

  • Category
    Economy
  • Published
    19th Aug, 2022

Context

August 15, 2022 marked 75 years of our country’s Independence and of its economy as a self-managed one. In its advancements since, the economy changed structure and evolved with many successes as well as failings.

  • This brief aims to analyse an overview of how Indian economy has come through over the last 75 years.

Background

  • India was classified as a ‘third-world’ country at the time of Independence from British rule in 1947.
  • But over the past seven decades, its GDP has grown from just Rs 2.7 lakh crore to Rs 150 lakh crore.
  • The nation weathered many crises to be ranked among the biggest economies of the world and the fastest growing major economy on the planet.

Analysis

What is the current status?

  • Energy security: The country is addressing energy security by increasing focus on renewable sources, biofuels and hydrogen, it is promoting domestic manufacturing through schemes such as PLI that provide Rs 1 lakh crore of incentives to local production units.
  • Digitalisation (India’s techade): The Digital India Movement with the production of semiconductors, 5G networks, and optical fibre networks show has shown great results in education, healthcare and changes in common man’s lives.

India's Socio-Economic Trajectory 

Gross Domestic Product (GDP)

  • Meaning: the monetary measure of all goods and services produced in a country in a year
  • GDP rose from ? 2.79 lakh crore (at constant prices) in 1950-51 to an estimated 147.36 lakh crore in 2021-22.

Per Capital Net National Income

  • Meaning: Net National Product is depreciation deducted from Gross National Product (GDP + income from foreign sources). 
  • India's per capita Net National Income rose from ? 12,493 in 1950-51 to ? 91,481 in 2021-22 (provisional estimates). 

 

Total Revenue 

  • Meaning: Centre's total revenue receipts

Rose from ? 171.15 crore in 1947-48 to ? 20,78,936 crore in 2021-22, as per this year's Budget revised estimates. 

Forex Reserves 

 

  • India's foreign exchange reserves rose from ? 911 crore in 1950-51 to ? 45,42,615 crore on August 5, 2022.
    • The latest figure includes India's Special Drawing Rights and reserve position in the IMF. 
  • Currently, India has the fifth largest forex reserves in the world. 

Foreign Trade  

 

  • In 1950-51, India's nascent foreign trade stood at ? 1,214 crore, with imports slightly exceeding exports. After India's economic liberalisation, the trade deficit widened substantially. 
  • In July 2022, foreign trade (merchandise and services) stood at over $143 billion. However, the overall trade deficit amounted to $21 billion as imports far exceeded exports.   

Foodgrain production 

  • Leading producer:According to Food and Agriculture Organisation (FAO), India is among the leading producers of milk, pulses and jute, rice, wheat, sugarcane, groundnut, vegetables, fruit and cotton
  • In 1950-51, foodgrain production stood at 50.8 million tonnes, which rose to an estimated 316.06 million tonnes in 2021-22. 

Literacy rate 

 

  • India's literacy rate rose from a mere 18.3 per cent in 1951 to 77.7 per cent in 2017-18. 

Sex Ratio 

  • Meaning:the total female population per 1,000 males

 

  • India's sex ratio stood at 946 in the 1951 census. In 2021, the sex ratio read 1,020 females for every 1,000 males, which put India on par with several developed nations. 

Important Events during the journey

  • Planning Commission & FYPs: India set up the Planning Commission in 1950 in order to oversee the entire range of planning, including resource allocation, implementation and appraisal of five-year plans (FYPs).
  • Nationalisation: From 50s to 91, several industries, companies were nationalised by the government.
    • Nationalised airlines—Air India, Air Services of India, Airways (India), Bharat Airways, Deccan Airways, Himalayan Aviation, Indian National Airways, Kalinga Airlines, and the Air India International
    • In 1969, 14 leading banks were nationalized on July 19, 1969.
  • Liberalisation: The Narasimha Rao government, including then Finance Minister Manmohan Singh, initiated economic reforms in 1991. These reforms aimed to liberalise the economy by doing away with the Licence Raj. 
  • Demonetisation & GST: Two of the most talked about economic events in the 21st century are Demonetisation and Good & Services Tax (GST). 

What are the urgent challenges that need to be taken care of?

The urgent challenges are as given below:

Unemployment

  • India’s overall unemployment rate is estimated to be between 8-10%; only 49% of working age population participates in the labour force compared to Bangladesh’s 59% and China’s 68%, while female labour force participation has been consistently declining to just 26%.
  • Informal employment dominates (almost 90%) with low pay and lack of social security; a worrying slip back to agriculture from services and manufacturing has been observed in the last few years.

Income inequality

  • Income inequality has steadily mounted in the past three decades.
  • The Gini index, which measures the distance from a perfectly equal distribution (0) and extreme inequality(100) in the distribution of income (in India’s case, consumption expenditure) among individuals or households, was reported at 35.7 in 2011 (31.7% in 1993), the last year when consumer expenditure was surveyed.

Climate Change

  • A challenge that will continuously evolve to the forefront will be tackling climate change. India is amongst the most vulnerable countries and the costs of climate change, be these from pollution or the increased frequency of extreme weather events, have rapidly escalated. The commitment to a net zero carbon emissions economy by 2070 will require significant effort, resources and planning.
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