“At the stroke of the midnight hour, when the world sleeps, India will awake to life and freedom. A moment comes, which comes but rarely in history when we step out from the old to new when an age ends, and when the soul of a nation, long suppressed, finds utterance.“
~An excerpt from Jawaharlal Nehru’s Tryst With Destiny speech, August 15, 1947
This 15th of August, India celebrates its 75th independence day marking 75 years of freedom, democracy, and development. Through the years since 1947, India has shown significant progress in spheres of social, cultural, political, and economic conditions, transforming it into one of the fastest developing nations and has emerged as a major global player.
Historically, India was the world’s largest economy with extensive trade connections spread across the world. During the 1700s, India produced nearly 30% of global industrial output. According to economic historians Immanuel Wallerstein, Irfan Habib, Percival Spear, and Ashok Desai, per-capita agricultural output in 17th-century Mughal India was higher than in 17th-century Europe and early 20th-century British India.
In the latter of the 18th century, the Mughal Empire declined and India went through a phase of deindustrialization and British rule further worsened the situation. There was almost no industrial production during the British Raj as raw materials and agricultural produce were shipped to Europe, converted into final products, and eventually sold in Indian markets. In 1820, India’s GDP was 16% of global GDP which slipped down to 14% in 1870 and to merely 4% in 1947.
On 15th August 1947, India became an independent nation. Independence came with dreams of economic, social, and political prosperity and left leaders, economists, and politicians with the arduous task of accelerating economic growth. India was engulfed in abject poverty at the time of Independence. Less than a sixth of Indians were literate, there were stark social differences, health conditions were poor and most people were unemployed. These factors caused obstacles in an already difficult task of transforming the Indian economy.
India’s History Of Economic Reforms Since Independence
India’s economic plan gave prime importance to the public sector which had the authority over private enterprises. The Planning Commission was set up in 1950 for the ideation, allocation, and implementation of five-year plans. The first five-year plan was implemented in 1951 which focused on the growth of the agriculture sector. It turned out successful, showing economic growth of 3.6% annually. The focus was now shifted towards industrialization with the second five-year plan and industrial policy resolution. This paved the way for industrial development and license raj.
But the quest for rapid industrialization required reallocation of funds from the agricultural sector to the industrial sector, resulting in a shortage of food, inflation, and depleting foreign exchange reserves. This led to the realization of the importance of private enterprise and foreign investment. Gandhi nationalized 14 private banks in 1969 to accelerate agricultural lending which increased farm credits. Under Indira Gandhi, the Indian rupee was devalued by a sharp 56%. It was done to tackle the balance of payments but it resulted in increased inflation. India reached the International Monetary Fund for loans and it had to open its economy and end license raj which resulted in mushrooming of various industries and plenty of choices for consumers.
The Modi Government brought many modifications to the Indian economy, the most notable being the demonetization of 2016. India went through an overnight demonetization wherein 500 and 1000 rupee notes were declared invalid from midnight of 8 November 2016. This was done to curb the flow of black money in the economy. PM Modi also implemented the goods and services tax which clubbed various indirect and central taxes into one. This removed tax barriers between states and ensured a common market. Many such economic reforms and policies have been implemented through the years to strengthen the economy.
Impacts Of Economic Reforms
The impact of these reforms is remarkable and can be comprehended with the help of several economic indicators such as growth, literacy, income levels, etc.
Since 1947, India has achieved tremendous progress in growth despite an increase in population and inflation. India’s GDP has increased from Rs 2,939 billion during 1950-51 to Rs 1,40,776 billion (2011-12 constant prices) in 2018-2019. Similarly, the average Indian citizen earned an income of just around Rs 7,513 during 1950-51 which increased to Rs 92,565 during 2018-19 (2011-12 constant prices). The agricultural sector is an integral part of the Indian economy and more than half of India’s population depends on it for livelihood. The Green Revolution of the 1960s acted as a game-changer, significantly increasing productivity and surplus production. The net production of foodgrains in India increased from around 48 million tonnes during the 50s to a massive 241 million tonnes during 2017. India is also the leading producer of rice, wheat, various fruits and vegetables, and milk.
Liberalization, globalization, and privatization of the Indian industrial sector as a result of the new economic policy of 1991, opened new doors for diverse market development and foreign investment. Where earlier there were only three automobile companies, today there are numerous firms in the automotive industry including international companies. Many startups, unicorns have mushroomed and India’s IT skills are known all over the world. The service sector consisting of travel, tourism, trade, and hospitality has also flourished at a staggering amount of Rs 24,711 billion in 2018-19 from Rs 308 billion during 1950-51. The civil aviation industry, national roads and highways, and power sector has also shown extraordinary growth and development.
Human Development Index indicators play a crucial role in measuring a country’s development. India’s literacy rate has increased from 18.3% during the 1950s to 74% in 2018. Access to safe drinking water has also increased from 18.3% during the 1950s to 91.4% during 2011. Due to advancements in medical technology and infrastructure, India’s health conditions have improved. The infant mortality rate at the time of Independence was as high as 509 deaths per 1000 births. It has come down to 30 deaths per 1000 births. The number of enrolments in schools and colleges has also risen significantly.
These developments and reforms have today made India the fifth-largest economy in the world when it was one of the poorest countries at the beginning of the 20th century. Considering the growth rate of the Indian economy, it has been forecasted to jump to the third position by 2031. Many more economic reforms and revolutions will come about as India seeks to become a five trillion-dollar economy.
Feature image is for representational purposes only.