According to latest World Bank Data for 2017, Indian Economy has surpassed France to become the sixth largest economy in the world and is swiftly moving up to replace the United Kingdom to become the fifth largest economy in the world. India’s GDP was at $ 2.597 trillion in 2017 whereas France economy stood at $ 2.582 trillion. The difference between the economy of India and UK is just $ 25 billion an indication that India is going soon to replace the UK to enter top 5 clubs and till 2050 to be the second largest economy in the world.
Historical Trends of Indian Economy:
India popularly known as the golden bird (sone ki chidiya) in ancient times was an economic powerhouse of the world. From the time of Harappan civilization till the Mughal Era, India was well connected through land and sea to the important civilisations of the world with a thriving trade. Before to be colonized by the Britishers, India’s share in world GDP was about 27% in 1700. Indian textiles were in demand all across the world with flourishing cities like Decca ( now called Dhaka), and Machilipatnam (now called Masulipatnam).
How British rule affected Indian Economy?
With the battle of Plassey in 1757, everything began to change in India. The British started using discriminately policies on Indian textile industry to promote their own Industry made goods which led to decline in the centers of Indian textile Industries like Dhaka which became from a flourishing town to a deserted city. Shashi Tharoor in his book “ An Era of Darkness” characterized it as the first great deindustrialization in the world. The decline in trade led weavers and artisans to move to villages for agriculture which led to a large-scale rural poverty in India for the first time. The worst scenario of Indian weavers and artisans can be best described in the words of Lord William Bentinck:
“The bones of cotton weavers were bleaching the plains of India.”
Thus when the British left India, its share in world’s GDP stood at mere 3% with widespread inequality and poverty.
How Indian Economy shaped after Independence?
With the advent of Independence India adopted a mixed economy based on planned model popularly known as “Nehru- Mahalanobis Model”. This era which ended in the 1990s was termed as “Licence Raj”. There were strict regulations on private industries which can be summed in the words of JRD Tata:
“I cannot decide how much to borrow, what shares to issue, at what price, what wages and bonus to pay, and what dividend to give. I even need the government’s permission for the salary I pay to a senior executive.”
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The Disintegration of USSR then, India’s largest trade partner and Gulf war leading to rising in oil prices led to a balance-of-payments crisis. Thus in return of bailout loan of about $1.8 billion, India adopted LPG reforms. The reforms soon made India one of the fastest growing economy in the world, who along withstood with China against the global financial crisis of 2008.
Future Trends of Indian Economy –
According to PWC report, India will Surpass Japan, Germany, and Britain to become the third largest economy by GDP at market exchange rates( It is already third largest by GDP at PPP) by 2030. Also, it will surpass US to become 2nd largest economy by 2040 in terms of GDP by PPP.
What are the challenges for the Indian Economy?
Future predictions of Indian economy will be met with the challenges of widespread poverty, lack of proper infrastructure, low quality of education particularly primary education and high unemployment. Although India will be the third largest economy by 2050 in terms of GDP at MERs and second largest by GDP at PPP, still it’s per capita income will be lowest among the top 10 economies (which means the low standard of living compared to the others) and will be characterized by widespread inequality.
Thus to tackle challenges for a better future what India needs is a strong leadership with high investment in Infrastructure, education, health and utilization of its demographic dividend. Widespread poverty along with growing inequalities must be addressed as soon as possible.