In recent years, India has become a major player in the global economy and is now the fifth-largest economy in the world in terms of GDP, behind the United States, China, Japan, and Germany. However, India is the third-largest economy in the world in terms of Purchasing Power Parity (PPP), which takes into account the relative cost of living and purchasing power of the local population in different countries. PPP is often considered a more accurate measure of a country’s economic size and power than nominal GDP, which is based on market exchange rates.
The Angus Maddison research on the Indian economy is a widely cited study that provides historical data on the economic performance of India over the past two millennia. The research was conducted by the late economist Angus Maddison, who collected data on GDP per capita, population, and other economic indicators for various countries and regions. The study shows that India was one of the wealthiest countries in the world before the arrival of British colonizers in the 18th century. However, the Indian economy experienced a decline during the colonial period, with GDP per capita falling by around 30% between 1700 and 1900. The economy began to recover after India gained independence in 1947, with GDP per capita increasing by around 2% per year between 1950 and 1980. However, the research also highlights that India’s economic growth has been uneven, with some regions and sectors growing faster than others.
The Indian economy before the country became a republic in 1950 was primarily agrarian, with around 70% of the population dependent on agriculture for their livelihood. The economy was characterised by low productivity, widespread poverty, and a lack of industrialisation. After India became a republic, the government implemented a series of economic reforms and development plans to boost economic growth and reduce poverty. The government invested in infrastructure, education, and health care, and implemented policies to promote industrialisation and export-oriented growth. As a result, the Indian economy has grown significantly, with GDP per capita increasing at an average rate of around 3.5% per year. Despite this growth, there are still significant income disparities and pockets of poverty in the country.
Under Prime Minister Modi’s government, India has seen significant improvements in its ratings by international agencies, particularly in terms of ease of doing business and economic freedom. The World Bank’s Ease of Doing Business Index, which measures the ease of starting and operating a business in different countries, has seen India’s ranking improve from 142nd in 2014 to 63rd in 2022. India’s ranking in the Heritage Foundation’s Index of Economic Freedom, which measures the level of economic freedom in different countries, has also improved, rising from 126th in 2014 to 115th in 2021.
However, it is worth noting that these ratings and rankings are based on a variety of factors and are subject to change depending on the economic conditions of the country. Additionally, there have been criticisms about the rating methodologies used by some international agencies, such as the World Bank’s Ease of Doing Business.
There have been some improvements in the reduction of corruption by government officials and politicians in India since 2014. The Modi government has implemented a number of policies and initiatives aimed at reducing corruption and improving transparency, such as the establishment of the National Anti-Corruption Bureau, the launch of the e-governance platform “Digital India” and the implementation of the Goods and Services Tax (GST). While these measures have led to some improvements in reducing corruption, there is still a long way to go in terms of ensuring a corruption-free government in India. The country still ranks poorly on various corruption perception indexes, such as the Transparency International’s Corruption Perception Index, where India ranks 85th out of 180 countries (2021), still perceived as more corrupt.
One of the key economic initiatives under Modi’s government has been the Make in India campaign, which aims to encourage foreign companies to invest in India and promote the country as a manufacturing hub. The campaign has led to an increase in foreign investment in the country and the development of new industrial clusters, but the results have been mixed, and the manufacturing sector has not seen the growth as expected.
Demonetisation and GST were major policy changes aimed at cleaning up the Indian economy, reducing corruption and promoting growth. Goods and Services Tax (GST), did simplify and modernise India’s indirect tax system which was implemented in 2017. Demonetisation and GST were seen as necessary steps to tackle corruption and black money. Demonetisation was intended to curb the use of black money and counterfeit currency in the economy, which was hampering growth. GST was seen as a way to improve compliance and increase revenue collection, by bringing more businesses into the formal economy. Together, these measures have helped to clean up the Indian economy and create a more transparent and equitable business environment, which has laid the foundation for sustainable economic growth and development in the country.
Modi’s government has also implemented a number of policies aimed at improving the business environment and promoting entrepreneurship, such as the Insolvency and Bankruptcy Code, which aims to speed up the resolution of insolvency cases.
Based on the data available, it is clear that India has made significant economic progress since becoming a republic in 1950. The country has experienced steady GDP growth and has made significant strides in reducing poverty and income inequality. However, the Indian economy has faced challenges in recent years, including fluctuations in GDP growth and the impact of the COVID-19 pandemic.
It is difficult to predict India’s growth path with certainty. However, if the government continues to implement policies and reforms aimed at promoting economic growth, reducing poverty and income inequality, and improving the business environment, it is likely that the Indian economy will continue to grow and develop in the future. The demographic dividend presents a great opportunity for India to accelerate its economic growth, but it’s crucial that the government continues to implement policies that will create jobs and improve the skills of its young workforce. This can be done by investing in education, training, and employment opportunities for the youth, and by creating a business-friendly environment that promotes entrepreneurship and innovation.
In fine, India has made significant progress in terms of economic growth and development since becoming a republic in 1950. The country has experienced steady GDP growth and has made strides in reducing poverty and income inequality. However, the Indian economy has faced challenges in recent years, including fluctuations in GDP growth and the impact of the COVID-19 pandemic. Under Prime Minister Modi’s government, India has seen some improvements in its ratings by international agencies, particularly in terms of ease of doing business and economic freedom. However, it is worth noting that India’s GDP growth has been fluctuating, and it has been affected by factors such as demonetisation, GST implementation, and the COVID-19 pandemic. Additionally, there have been some improvements in the reduction of corruption by government officials and politicians in India since 2014, but still a long way to go.
Article by
CA. M R Ranjit Karthikeyan
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