The economic development in India followed socialist-inspired politicians for most of its independent history, including state-ownership of many sectors; India's per capita income increased at only around 1% annualised rate in the three decades after its independence. Since the mid-1980s, India has slowly opened up its markets through economic liberalisation. After more fundamental reforms since 1991 and their renewal in the 2000s, India has progressed towards a free market economy. The Indian economy is still performing well, with foreign investment and looser regulations driving significant growth in the country.
In the late 2000s, India's growth reached 7.5%, which will double the average income in a decade. IMF says that if India pushed more fundamental market reforms, it could sustain the rate and even reach the government's 2011 target of 10%. States have large responsibilities over their economies. The average annual growth rates (2007–12) for Gujarat (13.86%), Uttarakhand (13.66%), Bihar (10.15%) or Jharkhand (9.85%) were higher than for West Bengal (6.24%), Maharashtra (7.84%), Odisha (7.05%), Punjab (11.78%) or Assam (5.88%). India is the fourth largest economy in the world by nominal basis and the third largest by purchasing power parity adjusted exchange rates (PPP). On per capita basis, it ranks 140th in the world or 129th by PPP.
The economic growth has been driven by the expansion of the services that have been growing consistently faster than other sectors. It is argued that the pattern of Indian development has been a specific one and that the country may be able to skip the intermediate industrialisation-led phase in the transformation of its economic structure. Serious concerns have been raised about the jobless nature of the economic growth.NOVOTNÝ, J., RAMACHANDRAN, N. (2010): Alternative to jobless growth? All-India context and a case of participatory development scheme from rural Tamil Nadu . Geografie, 115, 3, 330–346.
Favourable macroeconomic performance has been a necessary but not sufficient condition for the significant improvement in the human development indicators. Although the rate of poverty declined after economic reforms of 1991, the improvement in human development has been less than satisfactory. For instance, child malnutrition has continued to persist (46% in 2005–6).CHATTERJEE, P. (2007): Child malnutrition rises in India despite economic boom. The Lancet, 369, No. 9571, pp. 1417–1418.
The progress of economic changes in India is followed closely. The World Bank suggests that the most important priorities are public sector reform, infrastructure, agricultural and rural development, removal of labour regulations, reforms in lagging states, and HIV/AIDS.India Country Overview 2008 . World Bank For 2018, India ranked 77th in Ease of Doing Business Index. According to Index of Economic Freedom World Ranking an annual survey on economic freedom of the nations, India ranks 123rd as compared with China and Russia which ranks 138th and 144th respectively in 2014.
At the turn of the century India's GDP was at around US$480 billion. As economic reforms picked up pace, India's GDP grew five-fold to reach US$2.2 trillion in 2015 (as per IMF estimates).
India's GDP growth during January–March period of 2015 was at 7.5% compared to China's 7%, making it the fastest growing MAJOR economy. During 2014–15, India's GDP growth recovered marginally to 7.3% from 6.9% in the previous fiscal. During 2014–15, India's services sector grew by 10.1%, manufacturing sector by 7.1% & agriculture by 0.2%. Indian Economy grew at 7.6 & 7.1 in FY 2015–16 and FY 2016–17 respectively as major reforms had taken place like demonetization and implementation of GST in FY 2016–17.
History Prior to India's Independence, from the period of 1900 to 1947, per capita income in India had either declined or stagnated. Post-Independence, Jawaharlal Nehru demonstrated his willingness to compromise socialism for the perceived benefit of the country to provide financial incentives for the expansion of private enterprise. However, after the crisis of 1957, India turned towards import substitution industrialization and introduced foreign exchange. The Nehru-Mahalanobis approach, often referred to as the Second Five Year Plan, emphasized the development of basic and heavy industries as a means of accelerating economic growth. These included steel, copper, petrochemicals, paper, coal, and oil. Mahalanobis strived for India to reach autonomy, ridding any outstanding debts. Critics disagreed with this approach, stating that World Bank's claim of Indian export prospects being low were falsified and due to India's inward-looking strategy, the growth opportunity of the world economy was missed. Nonetheless, over 1950–1965, India's acceleration of per capita income growth had increased an average of 1.7%, a value not exceeded since.
The discourse on the efficacy of the Nehru-Mahalanobis Strategy is commonly contested by economists. A criticism of the approach emphasizes the lack of resource allocation in the agriculture sector. It is argued that the misbalanced weightage towards the machine-making sector contributed to the increase in food-grain prices and thus, perpetuated poverty and malnutrition. Defenders of the strategy claim that it sought to increase agricultural output by increasing the output-capital ratio. This agreeably would have been accomplished through land-reforms, something the strategy did not address, not indicating a problem with the strategy itself.
Agriculture
India ranks second worldwide in farm output. Agriculture and allied sectors like forestry, logging and fishing accounted for 18.6% of the GDP in 2005, employed 60% of the total workforce and despite a steady decline of its share in the GDP, is still the largest economic sector and plays a significant role in the overall socio-economic development of India. Yields per unit area of all crops have grown since 1950, due to the special emphasis placed on agriculture in the five-year plans and steady improvements in irrigation, technology, application of modern agricultural practices and provision of agricultural credit and subsidies since the green revolution.
India is the largest producer in the world of milk, cashew nuts, coconuts, tea, ginger, turmeric and black pepper.Agriculture sector Indo British Partnership network, Retrieved in December 2007 It also has the world's largest cattle population (193 million).Lester R. Brown World's Rangelands Deteriorating Under Mounting Pressure Earth Policy Institute, Retrieved on- February 2008 It is the second largest producer of wheat, rice, sugar, groundnut and inland fish.Indian agriculture Agribusiness Information Centre, Retrieved on- February 2008 It is the third largest producer of tobacco. India accounts for 10% of the world fruit production with first rank in the production of banana and sapota, also known as chiku.
The required level of investment for the development of marketing, storage and cold storage infrastructure is estimated to be huge. The government has implemented various schemes to raise investment in marketing infrastructure. Amongst these schemes are Construction of Rural Go downs, Market Research and Information Network, and Development / Strengthening of Agricultural Marketing Infrastructure, Grading and Standardisation.Agriculture marketing india.gov Retrieved on- February 2008
Main problems in the agricultural sector, as listed by the World Bank, are:India: Priorities for Agriculture and Rural Development . World Bank India's large agricultural subsidies are hampering productivity-enhancing investment. Overregulation of agriculture has increased costs, price risks and uncertainty. Government interventions in labour, land, and credit markets. Inadequate infrastructure and services.
Research and development The Indian Agricultural Research Institute (IARI), established in 1905, was responsible for the research leading to the "Indian Green Revolution" of the 1970s. The Indian Council of Agricultural Research (ICAR) is the apex body in kundiure and related allied fields, including research and education.Objectives Indian agricultural research institute, Retrieved in December 2007 The Union Minister of Agriculture is the President of the ICAR. The Indian Agricultural Statistics Research Institute develops new techniques for the design of agricultural experiments, analyses data in agriculture, and specialises in statistical techniques for animal and plant breeding. Prof. M. S. Swaminathan is known as "Father of the Green Revolution" and heads the MS Swaminathan Research Foundation.MS Swaminathan Times Inc. Retrieved on- 21 February 2008 He is known for his advocacy of environmentally sustainable agriculture and sustainable food security.
Industrial output
India is fifth in the world in factory output. Major clusters of manufacturing are mainly concentrated in the states of Maharashtra, Gujarat, Karnataka, Tamil Nadu, Telangana and Andhra Pradesh due to relatively better infrastructure and quality of labor force. Manufacturing sector in addition to mining, quarrying, electricity and gas together account for 27.6% of the GDP and employ 17% of the total workforce. Economic reforms introduced after 1991 brought foreign competition, led to privatisation of certain public sector industries, opened up sectors hitherto reserved for the public sector and led to an expansion in the production of fast-moving consumer goods. India has emerged as the second largest manufacturer of mobile phones in the world with smartphone exports exceeding $10 billion in FY 2022–23. India has also emerged as the fourth largest manufacturer of automobiles behind only China, United States and Japan. India produced approximately 4.4 million cars in 2021.
Post-liberalisation, the Indian private sector, which was usually run by oligopolies of old family firms and required political connections to prosper was faced with foreign competition, including the threat of cheaper Chinese imports. It has since handled the change by squeezing costs, revamping management, focusing on designing new products and relying on low labour costs and technology. Under the Modi Government, various initiatives are taking place like Make In India campaign, to boost the Indian industries. This will help the economy to grow as budding entrepreneurs will open industries and local things will get promoted.
Services India is fifteenth in services output. Service industry employ English-speaking Indian workers on the supply side and on the demand side, has increased demand from foreign consumers interested in India's service exports or those looking to outsource their operations. India's IT industry, despite contributing significantly to its balance of payments, accounts for only about 1% of the total GDP or 1/50 of the total services.
During the Internet bubble that led up to 2000, heavy investments in undersea fibre-optic cables linked Asia with the rest of the world. The fall that followed the economic boom resulted in the auction of cheap fiber optic cables at one-tenth of their original price. This development resulted in widely available low-cost communications infrastructure. All of these investments and events, not to mention a swell of available talent, resulted in India becoming almost overnight the centre for outsourcing of Business process.What's Next for the Startup nation Within this sector and events, the ITES-BPO sector has become a big employment generator especially amongst young college graduates. The number of professionals employed by IT and ITES sectors is estimated at 1.3 million as of March 2006. Also, Indian IT-ITES is estimated to have helped create an additional 3 million job opportunities through indirect, induced and in helpful manner have created employment.ITES and BPO Services india.gov Retrieved on- February 2008
GDP growth rate