The India economy, the third largest economy in the world in terms of purchasing power, is going to touch new heights in coming years. As predicted by Goldman Sachs, the Global Investment Bank, by 2035 India would be the third largest economy of the world just after US and China.
It will grow to 60% of size of the US economy. This booming economy of today has to pass through many phases before it can achieve the current milestone of 9% GDP. The history of Indian economy can be broadly divided into three phases: Pre- Colonial, Colonial and Post Colonial. PRE COLONIAL: The economic history of India since Indus Valley Civilization to 1700 AD can be categorized under this phase. During Indus Valley Civilization Indian economy was very well developed.
It had very good trade relations with other parts of world, which is evident from the coins of various civilizations found at the site of Indus valley. Before the advent of the East India Company, each village in India was a self sufficient entity and was economically independent as all the economic needs were fulfilled within the village COLONIAL INDIAN ECONOMY: The arrival of the East India Company in India caused a huge strain to the Indian economy and there was a two-way depletion of resources. The British would buy raw materials from India at cheaper rates and the finished goods were sold at higher than normal price in Indian markets.
During this phase India’s share of world income declined from 22.3% in 1700 AD to 3.8% in 1952. POST COLONIAL INDIAN ECONOMY: After India got independence from colonial rule in 1947, the process of rebuilding the economy started. For this various policies and schemes were formulated. First five year plan for the development of Indian economy came into implementation in 1952. These Five Year Plans, started by Indian government, focused on the needs of the Indian economy. If on one hand agriculture received the immediate attention on the other hand the industrial sector was developed at a fast pace to provide employment opportunities to the growing population and to keep pace with the developments in the world. Since then the Indian economy has come a long way.
The Gross Domestic Product (GDP) at factor cost, which was 2.3 % in 1951-52 reached 6.5 in the financial year 2011-2012 Trade liberalization, financial liberalization, tax reforms and opening up to foreign investments were some of the important steps, which helped Indian economy to gain momentum. The Economic Liberalization introduced by Man Mohan Singh in 1991, then Finance Minister in the government of P V Narsimha Rao, proved to be the stepping-stone for Indian economic reform movements. To maintain its current status and to achieve the target GDP of 10% for financial year 2006-07, the Indian economy has to overcome many challenges.
Challenges before Indian economy:
Population explosion:The rising population is eating into the success of India. According to 2011 census of India, the population of India has crossed one billion and isgrowing at a rate of 2.11% approx. Such a vast population puts lots of stress on economic infrastructure of the nation. Thus India has to control its burgeoning population. Poverty: As per records of National Planning Commission, 36 crore people are living below the poverty line in India in 2012. Unemployment:The increasing population is pressing hard on economic resources as well as job opportunities. Indian government has started various schemes such as Jawahar Rozgar Yojna, and Self Employment Scheme for Educated Unemployed Youth (SEEUY). But these are proving to be a drop in an ocean. Rural Urban Divide:It is said that India lies in villages, even today when there is lots of talk going about migration to cities, 70% of the Indian population still lives in villages. There is a very stark difference in pace of rural and urban growth. Unless there isn’t a balanced development Indian economy cannot grow.
These challenges can be overcome by the sustained and planned economic reforms. These include:
- Maintaining fiscal discipline
- Orientation of public expenditure towards sectors in which India is faring badly such as health and education.
- Introduction of reforms in labour laws to generate more employment opportunities for the growing population of India.
- Reorganization of agricultural sector, introduction of new technology, reducing agriculture’s dependence on monsoon by developing means of irrigation.
- Introduction of financial reforms including privatization of some public sector banks.
A Global Economic Super Power by 2030
India is poised to take over the developed countries to emerge at the top of the heap in the global economic superpower league by 2030, says a survey.More than half of the respondents (53 per cent) of a survey commissioned by London-based independent think-tank Legatum Institute said India is likely to be the world’s most important economic power by 2030.
According to the respondents of the survey, India is now on course to outstrip developed nations such as — the United States, Japan, Germany and the fast-emerging economic giant China over the next two decades. The survey, which questioned nearly 2,400 Indian senior managers, entrepreneurs and aspiring entrepreneurs said the levels of confidence among the country’s wealth-creators is very high, with nearly nine in ten saying they expected India to be in a stronger economic position in the next five years. Only one in five said the world economic crisis had badly affected business in India, the survey said.
India is already moving up the economic league tables as the 12th largest economy in the world, as per the World Bank. Besides, it also ranked 45th in the internationally respected 2009 Legatum Prosperity Index — which embraces social and political data to provide a wider measure of national success. About two-thirds of the respondents said Indians were more entrepreneurial than people from other countries and 84 per cent said their country was going in the right direction. Beyond making money, Indian entrepreneurs are also highly motivated by the broader social impact of their work. Over half (54 per cent) of respondents say the social effects of their business, such as improving the quality of life in their communities or developing people, are a main motivation for what they do, the survey said.