Poet Robert Frost wrote, “Two roads diverged in a wood and I took the one less travelled by, and that has made all the difference.” As a nation, we are at 70 years old now. We need to reflect upon how we have traversed through all these years. And for a nation, the economy is a sleigh that drives its existence. Seven decades after Independence, India is the fifth largest economy, in terms of nominal GDP and the third largest by purchasing power parity (PPP).
India’s post-Independence history can be broadly classified into phases -- Indian version of socialism for 30 years from 1950-51 to 1979–80, and India’s experiments with free market economy since 1980. The country has seen abysmally low GDP growth. India’s gross national income in absolute numbers has grown from a mere Rs 2,92,996 crore (constant terms) in 1950-51, to Rs 1,20,34,713 crore in 2016-17. The GDP numbers have grown from Rs 2,69,724 crore in 1950-51 to 1,06,86,776 crore presently. Despite the GDP growing by almost 39 times over these years, the per capita income of the country has increased only 11 times from Rs 7,513 in 1950-51, to Rs 82,269 presently. One of the major reasons behind this disproportionate rise has been population explosion. While in 1951, we were a country of just 36.12 crore people, right now, we are a country of 130 crore people, showing an increase of 235.34%.
However, growth of the economy over the years has fluctuated, mostly depending on our economic policies. From 1951-64, during the era of Nehruvian socialist economy, the Indian economy grew at a pace of 4.4%. With Pandit Jawaharlal Nehru’s death in 1964, and his daughter Indira Gandhi taking the reigns the following year, the country’s military prowess took centre-stage. However, the economy took a hit. Marred with political realignments as well, the economy grew at a snail’s pace of 2.9% during 1965-79.
This phase was characterised by a conscious effort to increase the role of the state in the economy. Till 1979, investment grew strongly at 6.1% per annum, led by growth in government fixed investment at 7.2% per annum. Rapid growth of government consumption at 5.8% also far exceeded economic growth. However, the country, due to the psychological fallouts of British rule, wasn’t open to the idea of foreign investment.
On the other hand, devils like Licence Raj also gripped the economy. With the gradual opening up of the economy, during the period 1980-91, economic growth averaged at 5.5% per annum. The government slightly reduced Licence Raj and also promoted the growth of the telecommunication and software industries during the period.
In 1991, India still had a fixed exchange rate system. India started having balance of payments problems since 1985, and by 1991, India was in serious economic crisis. The government was close to default, the RBI refused new credit and foreign exchange reserves had reduced to the point that India could barely finance three weeks’ worth of imports.
Then came what is famously called the LPG (liberalisation, privatisation, globalisation) policy by the then Finance Minister Manmohan Singh. In the following decade, the economy grew by a robust average of 6% per annum. The phase has been characterised by a recognition of the harmful effects of industrial and other controls on distribution, production, and investment, and the need to remove distortions created by the government policy on industry and exports.
The decade of 2002-11 can be called the golden decade for the Indian economy. Despite the bubble-burst of 2007, the country grew at a robust 7.5% through the decade, also touching the double digit growth rate of 10.1% in 2007-08. Post 2011, the growth rate has slowed, owing to the economic stimulus package of 2008 that sent the economy into a wild goose chase. In December 2008, owing to the Great Recession, in order to provide a stimulus through plan expenditure, the government decided to seek approval for an additional plan expenditure of Rs 20,000 crore. The government also infused about Rs 3 lakh crore into the system for public spending through a range of measures. In 2016-17, the economy grew at 7.1%.
As India grew in age, so did the concept of economic development. Human Development Index (HDI) -- a composite statistic of life expectancy, education, and per capita income indicators, which are used to rank countries into four tiers of human dwwevelopment -- started gaining prominence. As per the latest ranking, India is ranked at 131 out of 188 countries in terms of HDI. The life expectancy at birth has gone up to 68.3 years in 2015, from 31 years in 1950. Literacy rate has gone up from 12% in 1950 to 74% as on date.
Though we have come a long way in terms of quantity, however, low HDI index of 0.624, reveals that we have to put more efforts on the quality.