Indian economy

Paramjit Singh Chandigarh University

ABSTRACT

The economy of India is a developing mixed economy. It is the world's sixth-largest economy by
nominal GDP and the third-largest by purchasing power parity (PPP). The country ranks 139th in per
capita GDP (nominal) with $2,134 and 122nd in per capita GDP (PPP) with $7,783 as of 2018.After
the 1991 economic liberalization, India achieved 6 to 7% average GDP growth annually. An attempt
has been made in the paper to explain the growth of real national income in India since the turn of the
century in terms of inputs of two principal factors, labor and capital, using an approach used by
Abramowitz, Denison and others. The entire economy and its two major sectors, agriculture and the
rest, have been separately studied. It has been found, among other things, that the combined factor
inputs explain almost the entire rate of growth of agriculture during the pre-independence period,
showing little changes in factor productivity. A growth accounting analysis disaggregates by major
sector, and highlights implications for aggregate productivity growth of the reallocation of resources
out of agriculture to more product activities in industries and services. But concerns are raised that
growth in services may be overstated. India will need to broaden its current expansion to provide
manufactured goods for the world market and jobs for its large pool of low-skilled workers. Increased
public saving, as well as a rise in foreign saving particularly FDI could augment the rising household
saving and support the increased investment necessary to sustain rapid growth.

INTRODUCTION

Indian economic policy after independence was influenced by the colonial experience, which was
seen as exploitative by Indian leaders exposed to British social democracy and the planned economy
of the Soviet Union. Domestic policy tended towards protectionism, with a strong emphasis on import
substitution industrialization, economic interventionism, a large government-run public
sector, business regulation, and central planning,] while trade and foreign investment policies were
relatively liberal.[ Five-Year Plans of India resembled central planning in the Soviet Union. Steel,
mining, machine tools, telecommunications, insurance, and power plants, among other industries,
were effectively nationalized in the mid-1950s. Two considerations have prompted me to submit this
paper for the present volume. First, Professor Mahalanobis, as the
Chairman of the Indian National Income Committee, 1949-54 initiated the regular official estimates
of national income in the country. Despite uncertainties of the official estimates due to the inadequacy
of observational base, that some conclusions about our post-independence growth can be drawn is
entirely due to his foresight, and conviction that having an annual series of nation's output cannot wait
till we get satisfactory estimates of all its components. Second, Professor Mahalanobis was surely
conscious of the various inadequacies of our macro-constructs of national income, labor force, etc.
Yet he courageously used these for purposes of formulation of Indian plans, demonstrating that a
priori guarantee of perfection of data need not be a condition for their effective use and perhaps
hinting that he considered the relevant Indian information good enough for his purpose. We attempt
here to explain the rate of growth of Indian national product during the present century in terms of
rates of growth of reproducible capital and labour force within the framework of a Denison-
Abramowitz model (Denison, The paper was discussed in the 8th Conference of the Indian
Association for Research in National.

OBJECTIVE OF THE STUDY

The aim of the work, i.e. the overall purpose of the study, should be clearly and concisely
defined. Aims: Are broad statements of desired outcomes, or the general intentions of
the research, which 'paint a picture' of your research project. Emphasize what is to be
accomplished (not how it is to be accomplished)

RESEARCH METHODOLOGY

The present study is essentially based on published secondary data collected from official
sources. Secondary data is analyzed with help of appropriate statistical tools of analysis.
Based on statistical tabulation of the data interpretation is done in appropriate chapter scheme
followed by pooling suggestions based on conclusions of the study.
Secondary data is collected from the annual reports of major Pharmaceutical companies as
well as Government publications.

RESEARCH LITRUATERE

Pre liberalization period (1947–1991)

Indian economic policy after independence was prejudiced by the royally experience, which

was seen as unequal by Indian leaders bare to British social democracy and the
planned economy of the Soviet Union.] household policy tended towards protectionism, with
a sturdy importance on import substitution industrialization, economic interventionism, a
large government-run public sector, business regulation, and central planning,  while trade
and foreign investment policies were relatively moderate. Five-Year Plans of India resembled
central planning in the Soviet Union. Steel, mining, machine tools, telecommunications,
insurance, and power plants, among other industries, were successfully public sector in the
mid-1950s. Since 1965, the use of high-yielding varieties of seeds, increased fertilizers and
improved irrigation facilities collectively contributed to the Green Revolution in India, which
improved the condition of agriculture by increasing crop productivity, improving crop
patterns and strengthening forward and backward linkages between agriculture and industry.
[129]
 However, it has also been criticized as an unsustainable effort, resulting in the growth of
capitalistic farming, ignoring institutional reforms and widening income disparities.
afterward, the Emergency and Garbs Hatao concept under which income tax levels at one
point rose to a maximum of 97.5% – a world record for non-communist economies – started
dilute the earlier efforts. In the late 1970s, the government led by Morarji Desai eased
restrictions on capacity expansion for incumbent companies, removed price controls, reduced
commercial taxes and promote the formation of small-size industry in large numbers.
Post-liberalisation period (since 1991)

The collapse of the Soviet Union, which was India's major trade partner, and the Gulf War,
which caused a spike in oil prices, resulted in a major balance-of-payments disaster for India,
which found itself facing the vision of non-payment on its loans. India asked for a
$1.8 billion rescue loan from the International Monetary Fund (IMF), which in return demand
de-guideline. In response, the Narasimha Rao  government, including Finance
Minister Manmohan Singh, initiate economic reforms in 1991. The reforms did away with
the License Raj, reduced tariff and interest rates and ended many public monopoly, allowing
automatic approval of foreign direct investment in many sectors. Since then, the overall thrust
of liberalization has remained the same, although no government has tried to take on
powerful lobbies such as trade unions and farmers, on contentious issues such as reforming
labour laws and reducing agricultural subsidies. By the turn of the 21st century, India had
progressed towards a free-market economy, with a large reduction in state control of the
economy and increased financial liberalisation. This has been accompanied by increases in
life expectancy, literacy rates and food security, although urban residents have benefit more
than rural populace. While the credit rating of India was hit by its nuclear weapons tests in
1998, it has since been raised to venture level in 2003 by Standard & Poor's (S&P) and
Moody's.] India experienced high growth rates, averaging 9% from 2003 to 2007. Growth
then moderate in 2008 due to the universal financial crisis. In 2003, Goldman Sachs predicted
that India's GDP in current prices would overtake France and Italy by 2020, Germany, UK
and Russia by 2025 and Japan by 2035, making it the third-largest economy of the world,
behind the US and China. India is often seen by most economist as a rising economic
superpower which will play a major role in the 21st-century global economy

India in progress recovery in 2013–14 when the GDP growth rate a Accelerated to 6.4% from
the previous year's 5.5%. The rushing sustained through 2014-15 and 2015–16 with growth
rates of 7.5% and 8.0% in that order. For the first time since 1990, India grew faster than
China which register 6.9% growth in 2015. However the growth rate afterward decelerate, to
7.1% and 6.6% in 2016-17 and 2017-18 respectively,[] partly because of the disruptive effects
of 2016 Indian banknote demonetisation and the Goods and Services Tax (India). India is
ranked 100th out of 190 country in the World Bank's 2018 ease of doing business index, up
30 points from the last year's 130. This is first time in history where India got into the top 100
rank. In terms of dealing with assembly permits and enforce contract, it is ranked among the
10 worst in the world, while it has a quite favorable ranking when it comes to protecting
minority investors or getting credit. 
The strong efforts taken by the Department of Industrial Policy and endorsement (DIPP) to
boost ease of doing business rankings at the state level is said to impact the overall rankings
of India.

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