The country’s metamorphosis from an economic laggard to the fastest growing economy globally is the result of visionary policy decisions in the past few decades
Offices of the global BPO, Serco Global Services, Mumbai; (Photo: Mandar Deodhar)
India’s transformation from a state of poor growth before 1947 to the fastest growing economy in the globe now has been a remarkable one. In the pre-Independence era, India’s real Gross National Product (GDP) grew only by an average 0.9 per cent a year. Post-Independence, the country embarked on an ambitious task of planned economic growth to come out of this stagnation.
The country also had to reckon with the aftereffects of the Second World War and Partition, in addition to consolidating the nation and building an administrative and political apparatus. Real GDP rose at an average annual rate of 4 per cent post-Independence, with any significant acceleration taking place only in the 1980s. Sectoral composition of the GDP gradually changed, with agriculture, which contributed more than half of the GDP during the first three Five-Year Plans, shrinking to one-third by the end of the 1980s.
The 1960s saw big economic decisions, including the nationalisation of 14 private banks. In 1983, Maruti, the small car that drove the rise of a new middle class and consumption, rolled out of the assembly line in Gurgaon, marking a high point in India’s manufacturing capabilities. The mid-’80s saw a leap in information technology and telecom. The 1990s saw liberalisation following the balance of payments crisis in 1991, the abolition of the Licence Raj and extensive reforms in the financial sector. The measures increased the competitiveness of the domestic industry, promoted foreign trade and encouraged the private sector and multinationals to invest in the country. The annual GDP growth rate went up to 6.1 per cent during the 1990s.
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The present government’s first stint (2014-19) was marked by the implementation of the Goods and Services Tax (GST) in July 2017. It also introduced the Insolvency and Bankruptcy Code in 2016, making it possible for lenders to oust errant promoters and retrieve at least part of their money. In its second stint starting 2019, the Narendra Modi-led government had to grapple with the Covid-19 pandemic, resorting to one of the strictest lockdowns in the world and a Rs 20 lakh crore Aatmanirbhar Bharat Abhiyan to help individuals and firms tide over the crisis. The economy, which was already tottering with sub-5 per cent growth for many quarters, also went into its fifth recession since iIndependence. It has now made a recovery, showing a growth of 4.1 per cent in the January-March quarter of 2021-22. The growth is still not broad-based, say economists, and private investment and consumption are lagging. However, the country remains a bright spot on the global stage where some nations are likely to see a recession, considering the uncertainty created by the Russian invasion of Ukraine.