India is set to mark the celebration of the 75th Independence Day. The cost of the Independence, however, has been on the ashes of the economy. The journey that the economy vogued has not been an easy one, from tatters to an economic powerhouse. Relentless and consistent efforts of citizens and government, year on year have built the India of today. As Dr. Manmohan Singh said, “The brightest jewel of the British crown” reclaimed its glory by becoming the 5th largest economy in the world.
In this blog, we will talk about 7 highlights that shaped the course of the Indian economy. For the convenience of readers, we have segregated it into parts.
We will first start off with the pre-liberalization period.
In 1700, India contributed 22.6% of the world economy, but by 1952, its contribution was only 3.8%. After Independence, the Indian treasury was exhausted and the ministry had to start fresh. R.K. Shanmukham Chetty, the first finance minister of the country started to focus on import substitution industrialization and setting up public sectors run by the government.
And since there were no large private sectors, the agenda was to employ as much labour via government sectors. They also started to pay close heed to heavy industries. By 1969, 14 banks were nationalized in India and the GDP had risen to 5,844.8 crores.
Many Indians are not aware of this policy, but the green revolution contributed vastly to the growth of the Indian agricultural sector.
It is a common fact that India's primary mass is associated with agriculture, but it was in 1965, under the leadership of Lal Bahadur Shastri that agriculture in India became industrialized. HYV or a high-yielding variety of seeds were provided, along with an enhancement of agricultural tools such as the usage of tractors, good quality pesticides, fertilizers, modern irrigation methods, etc. The working of the policy was supervised by M.S Swaminathan.
This saw a whopping 70% increase in the income of farmers and benefited agricultural sectors mainly in Punjab, Haryana, and Uttar Pradesh. However, the policy was marred with controversy in its later stages.
By the mid-1980s the government was trying to come up with measures to increase employment rates in the country. India was soon becoming a nation where the population was growing, but the employment rates weren't keeping up. The government's attitude towards private sectors finally began to change and they started to liberalize certain restrictions.
Slowly, the country's economy started to grow. From 1980 to 2002, the economy grew at a stage of 7.5% a year, making it one of the best performing economies for more than 2 decades. At the same time, to curb the yearly population growth of 2.2%, the government had started campaigns like, "Hum do humare do". Although, it did meet with certain criticism.
This marks the end of the pre-liberalization period. Let us now read about the post-liberalization period.
LPG (liberalization, privatization, globalization) didn't just kick-start as a grand idea of the government. In 1990, Chandra Shekhar Singh was sworn in as the Prime Minister. At that time, India was reeling in fiscal deficit as a result of poor economic policies. The reservoirs were empty and the IMF and World Bank stopped their assistance.
With no other option at hand, the government decided to use its gold reserves as collateral security and airlifted 47 tonne of gold to the Bank of England and 20 tonne to the Union Bank of Switzerland. Finally, the Chandra Shekhar government collapsed and P.V. Narasimha Rao was sworn in as Prime Minister. He roped in Dr. Manmohan Singh as his Finance Minister, which changed the course of the Indian economy.
The LPG policy opened India's doors to foreign investors and abolished the 'License Raj'. Tariff and interest rates were reduced and it eventually ended public monopoly. From the global perspective, it was a perfect opportunity as India had a growing youth population, a good section of the population was fluent in English, and India promised considerably cheap labor. Investments started to pour in. The maximum number of companies set shop in Bangalore under the governorship of S.M. Krishna and it soon came to be known as the silicon valley of India.
The LPG garnered tremendous success and the economy of India started to grow at a rapid pace. Until 2008, when things went down south. Although India did not face the major brunt, it was a wake-up call. The IT industry, which was a golden ray in India's growing structure, laid off nearly 5 lakh employees. Not only this, the automobile sector cut down its employment by 4.79%, the textile industry by 1.29% and the jewellery industry by 11.9%.
It made the government realize that India was heavily dependent on foreign investment and they would have to start setting the base for more domestic firms.
Demonetization was a shock to the citizens and an even bigger shock to the economy. It slowed down many sectors, especially because most of India is cash-heavy. As the line in front of banks and ATMs increased, the economy went through a short-term paralysis.
The demonetization policy had two major aims:
In the beginning, demonetization was praised because it aimed at 'cleansing' the economy, but eventually, an RBI report stated that 99% of the money was returned to them, which means, the money had legally become white. It was also highlighted that most people who possessed black money did not tangibly own them.
The latest inclusion to a very interesting economic history is the COVID-19 pandemic. What started off as the flu that would not last for more than a few weeks, extended its paws over a year. As the nation grappled with the lockdown, the second and third waves of the virus only made the situation worse. It tested the patience and capacity of the economies, in no way one could imagine. Almost 400 million people lost their jobs in 2020. Apart from this, many industries such as travel and tourism, hospitality, transport, textile, etc. faced setbacks. From an economic perspective, the pandemic washed the charts of growth for India, along with the world. But the comeback is always greater than the setback and with the onset of 2022, the vaccination has brought in a hopeful zeal among the people and the business to revamp.
Thus, only time will be the spectator of how India of tomorrow is crafted by India of today.
With that, we conclude our list of some of the most important economic highlights from 1947-2022. We hope this renewed your memory of certain very crucial events that have shaped the country, we call home.
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