EVOLUTION OF THE INDIAN ECONOMY
The economic history of India shows number of distinct phases from the time it fell under the colonial control to the modern times when it embarked on economic reforms. Before onset of the British colonial rule in India, India was among the richest countries of the world. According to some estimates during the Mughal period, India was the second largest economy having a share of almost 25 percent of the world economy.
Two centuries of the exploitative British rule led to India's wealth being drained away and the process of 'deindustrialization' taking a heavy toll on the people of India. The great nationalist leaders like Dadabhai Naoroji, R. C. Dutt highlighted economic exploitation of India. At the time of independence, India inherited a stagnant economy. Between 1900-1950, the real GDP growth rate of India was almost zero. The independent India embarked on a process of economic reconstruction and growth by adopting the model of Five-year planning. The beginning was made with the Mahalanobis Feldman model which aimed to build the capital goods industry to lay the foundation for self-reliant growth in India.
In the Initial year of planning, country achieved great success. The nation which was once dependent on food grain imports to feed her citizen attained self-sufficiency in food production by embracing Green Revolution. However, in the beginning of 1980s, India realized that its growth rate, sarcastically dubbed as the 'Hindu growth rate' of around 3 percent annually, was far too low to sustain the expanding aspirations of its people. The distortion in the planned economic process was glaringly reflected in the 'license-permit raj' that empowered the rent seeking class of bureaucrat-contractor-politician to extract surplus from the system.
This was the period when need of economic reforms was severely felt. The process of economic reforms picked up momentum by the early 1990s. India had to undergo structural adjustment in order to avoid defaulting on its international obligations towards debt repayment. The reforms moved apace to include opening up of the economy, decontrol and significant changes in the financial and banking sectors. The transition from the public sector attaining the 'commanding heights of economy' to the 'market driven open economy' has been a complex and multi-layered process. The transition has indeed resulted in an accelerated GDP growth rate of above 5 percent for the period 1991-92 to 2003-04 and above 6 per cent for the period 2003-04 to 2011-12. Fall in the poverty ratio, improvement in the FDI and better forex reserves have also been noticeable achievements of this period.
However, this period has also been marked by an increase in the level of inequality in the country. According to a study 'in both the early 1990s and the early 2000s the wealthiest 10 percent of wealth-holders held at least 50 per cent of total assets, while the least wealthy 10 percent held at most 0.4 per cent of total assets'. It needs to be highlighted that inequality in resource endowment also culminates into inequalities of opportunity which defeats the purpose of inclusive development that India has adopted as a stated objective of its economic policy.
There has also been a serious concern about employment generation in the period of economic reforms. The robust growth rate has not really been accompanied with improvement in the employment generation. Share of manufacturing sector in the GDP has also been quite low at 16 per cent, putting a structural constraint on the future prospect of growth with employment.
Many experts believed that India’s shift directly from Indeed agriculture sector is not conducive for sustaining the growth in the long run. In the last decade India witnessed splendid economic journey, earning title of “the fastest growing major economy”. Thanks to expansionary policy of the government, India was least affected country due to global slowdown of 2008. Even during the recessionary period, the country touched the growth rate above 6%. Realizing the potential of India’s Demographic dividend government has launched several programmes like Skill India to improve human capital resources. Lately, country has started focusing manufacturing sector and the programmes like Make in India has been launched to give a “big push” to manufacturing sector.
For any country tax structure is one of the key element of economic growth. A simplified tax structure is beneficial for both the taxpayers as well as tax authority. In order to simplified the indirect taxes in the country several indirect tax has been reduced to a single and simplified tax; Goods and Service Tax.
Efforts have been made to attract the Foreign Investment. Ease of doing business regime has been fastened and single window system for all clearance has been facilitated. Owing to government’s efforts, India’s Ease of Doing business rank has significantly improved from 130th in 2016 to 63th in 2020.
In the present situation almost all International Institutions are optimistic about high growth rate of India in future. At this juncture when India is aspiring to become leading economy of the world, it is imperative for the government to Create Opportunity and Reduce Vulnerability by embracing the concept of “Sustainable and Inclusive Economic Growth”.
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