Name of Student –SANAT PANDEY

Enrolment No.– L19BALB091

The growth and development of Indian economy from

1950 to 2020.

The Indian independence bought the social, economic and political freedom. It was a turning
point which undergone a massive transformation reflecting on the economic policies like
socialism and liberalization. The journey that was started with the Pt. Jawaharlal Nehru’s
ambition in Tryst with destiny speech on midnight hour of 15 August to make India
economic developed nation has now becoming reality with emerging as the fifth largest
economy in the world measured by nominal GDP whereas third largest by purchasing power
parity. The country which was hopelessly poor and had doubt on survival as nation due to the
steady deindustrialization by UK is now accounts for 8.5% of words GDP (Source IMF) and
surpassed the GDP of erstwhile colonial master who have ruled for more than 200 years on
us. The GDP of our country in 1950 was $30.6 billion which has now become 2.54 trillion
which showed that India has come a long way and have lot to achieve more. India's economic
model back in 1947 was envisaged with dominant role of the state in all the pervasive
entrepreneur and financial business because it was believed that planning is not possible in a
market economy hence state and public sector should be inevitable player for economic
progress.

INDIA’S GDP GROWTH

SOURCE: World Bank national accounts data and OECD National Accounts,2018.

Page 1 of 10
The very first budget of India was presented by India's first finance minister R.K.S Chetty on
26 November 1947. The budget focused on the fiscal federalism and to set up of planning
commission India set up the Planning commission in the year 1950. It was in presented with
the objective to promote rapid rise of economy and improve the standard of living by
increasing production and offering employment. The first eight plants emphasis on
investment in agriculture, industry and on the growth of public sector but after the launch of
9th plan in 1997 the indicative nature of economy promoted. The First five-year plan was
range from 1951 to 1956. It was based on Harrod-Domar model. This plan focus on
agriculture development and price stability. Nation get five IITs during this time. The target
growth was 2.1 % and it have achieved the growth of 3.6 %. The Second five-year plan was
period from 1956 to 1961. This plan is also called P.C. Mahalanobis plan because it was
based on two and four sector model of agriculture and industry prepared by professor P C
Mahalanobis. This plan focus on rapid industrialisation which mark with import through
foreign loans. The industrial policy of 1956 was established to achieve the goal of economic
policy through socialistic pattern. This plan was moderately successful with growth rate of
4.3%.
The Third five-year plan was from 1961 to 1966. In this plan the aim was to make India self-
reliant and self-generating economy but due to unforeseen event like Chinese aggression
(1962), Indo-Pak War (1965) and severe drought in 1965 the plan was failure which shifted
goals toward defence and development. The failure of third plan was marked with three
annual plans (1966-1969) where new agriculture strategy was implemented to meet food
shortage and steps taken to absorb the shock generated in previous plan. The Fourth five-year
plan was from 1969 to 1974. The aim was to accomplish growth with stability and
achievement of self-Reliance was promoted. Implementation of family planning programme
what the major target of this plan. India have to undergo Indo Pak war in that time that's why
actual growth was 3.3 %. The Fifth five-year plan was proposed to achieve attainment of self-
Reliance and removal of poverty. It promotes the distribution of income and growth in
domestic rate of savings, the growth rate was 4.8 %. There was a rolling plan from 1978 to
1980 put forward by Janata government to emphasize on employment.
The Sixth five-year plan was focus to increase national income, modernization of technology
and decrease in poverty and unemployment. The growth target of the plan was 5.2% but it
achieved a 5.7% growth. The Seventh five-year plan was from 1985 to 1990. With focus on
‘food, work, and productivity,' the Plan aimed to increase food grain output, increase job
opportunities, and increase productivity. This Plan was successful because economy recorded
6% of growth rate and finally struggle out of the Hindu rate of growth. The Eighth five-year
plan what is started from 1992 to 1997. The drastic policy measure was taken in fiscal and
economic reforms including liberalisation. The Eighth five-year plan has focused on the
growth in agriculture, manufacturing sector, export and import and actual growth rate was
around 6.8 %. The Ninth five-year plan focus to improve the infrastructure, health and
education and increase the participation of private sector. It also assigned priority to rural
development and agriculture in order to eradicate poverty. The Tenth five-year plan was from

Page 2 of 10
2002 to 2007 where the target was to improve the human index by focusing on literacy,
gender equality and infant mortality rate. The Eleventh five-year plan was from period 2007
to 2012. It was aimed towards faster and more inclusive growth. During this time the India
has emerged the fastest growing economy with actual growth rate of 8%. This five-year plan
was started with economic growth rate of 9.3 % but the growth decelerated to 6.7 % during
the global financial crisis of 2008.
Five Year Plans- Targeted Growth Vs. Actual Growth

Source: Planning Commission Reports

The 12th five-year plan was from the period of 2012-3017, it was India's last five-year plan.
The priority of this plan was to promote growth both inclusive and sustainable. The target of
this plan was 9% but it recorded growth rate of 8%. The broad vision of the plan was faster,
sustainable and inclusive growth by promoting regional balance, poverty reduction, improved
in human capital like health and education, skill development, advancement in information
technology, infrastructure, communication etc. In the year 2015, NDA government under
leadership of Narendra Modi demolished the planning commission and replace it with NITI
Aayog. It served as the think tank of the government to formulate medium and long-term
strategy after consulting with the states. The objective of the NITI Aayog is to setup
economic policy which incorporates with the national security interests through well-ordered
assistance programs and procedures with the States.

Economic Reforms of 1991

In the year 1991 there was an unprecedented financial crisis in the economy. The government
faced massive funds shortage and malfunctioning of its sectors. However, this crisis also
provides the opportunity to reform the situation and introduce fundamental change in
economic policy. There were many reasons to adopt new economic policy in 1991 like in that
time the industrial sector was facing massive loss and was in the state of decline that's why

Page 3 of 10
the new economic reform was much needed to kick-start the economy. During 1991 the fiscal
deficit was in rise and the country was going through unsustainable price rate and inflation
that's why it was necessary to implement New Economic Policy. Also in the year 1991 there
was adverse balance of payment between the centre and States which has risen to an
unprecedented level of 11% which ultimately proven the need for financial reform in India.
The new economic policy was introduced by then finance minister Dr. Manmohan Singh
under the leadership of Prime Minister PV Narasimha Rao. The objective of new economic
policy 1991 was to enter in the field of globalisation and make the India as market oriented
economy. The steps were taken to increase the growth rate and reduce the inflation rate in the
economy. The attempts were also made to create surplus foreign exchange reserves and
remove unwanted restriction for international flow of goods and services.
This economic reform opens the door for privatization hence enhance the role of private
players in economy. The economic reform of 1991 undergo three-fold development that is
Liberalisation, Privatisation and Globalisation. The prominent steps taken by the government
in the economic reform of 1991 are: -Reduction in tariff on exports and the custom duties in
order to attract global investment. The draconian Foreign Exchange Reputation Act (FERA)
was replaced by Foreign Exchange Management Act (FEMA) for the purpose of increasing
the foreign capital investment. The private sector undertakings (PSU) disinvested and sold to
private sectors in order to remove political interference in PSUs. The commercial banks were
allowed to determine their own interest rates under guidelines of RBI. The investment limit
was raised to rupees 1 crore for small scale industries. The freedom to import capital goods
and abolition of restrictive trade practices were adopted. This economic reforms proves to be
milestone in economic development of nation which causes great leap in the sectors like civil
aviation and communication, it gives rise to many start-up and mushrooming businesses
which increases productivity and competencies.

India’s Dream Run, 2003-08

Indian economy enjoyed a boom in growth from the period of 2003 to 2008. It was hailed as
one of the fastest growing economies in the world with the growth rate of 9% for five years.
The boom was associated with sharp upturn in investment rate, modest fiscal policy, price
stability and balance of payment deficits. The boom in 2003 was trigger by a sharp upturn in
World Trade since 2002. In which the revolution of technology and change in communication
give birth to outsourcing industry which ultimately boost the service exports of India and
enabled the expansion of aggregate supply of foreign private capitals. The ‘Dream Run' was a
debt-fuelled boom, with bank credit to the privatized corporate sector expanding at an
exponential rate, with a substantial portion going to businesses. India's economic rise was
fuelled not only by a surge in domestic credit, but also by a massive inflow of international
capital. By 2008, the total sum of FDI, foreign portfolio investments, and external
commercial borrowings had increased to 10% of GDP, up from 1% in the five years prior to
2003-04. During the growth of 2003-2008 massive surge was seen in communication sector

Page 4 of 10
with 24.2 percent growth rate followed by Banking and insurance with 12.8% growth, where
the agriculture and manufacturing sector registered 5 and10 percent growth respectively.

Real GDP before and after Global Economic Crisis

Source: IMF (International Monetary Fund) data

However, after 2008, the magical run of economy got sputtered due to global financial crisis.
In the year 2008, world was passing through recession due to the defaulted loan and crashed
property prices in US. In Sept 2008. Wall street got crashed because lenders have relaxed
their credit policy which drove up housing policies and lots of unaffordable loans in market
causes $10.2 trillion loss to US which ultimately led to the global negative growth rate. This
impact of financial crisis was felt on developing economy as well and slowed the growth rate.
India registered the sharp fall from 9.8% in 2007 to 3.9 % 2008. The fiscal deficit at pre-crisis
level at 2.5% increased to 6.46 in 2009-2010. In response to it Government of India has
adopted the 'allow and regulate' approach in order to gain track of its growth rate. The RBI's
proactive measures have ensured that adequate liquidity is available in the markets. Interest
rates and inflation rates have levelled off in the loan and consumer markets. The fiscal
stimulus has aided in cushioning the real-estate sector's decrease in private investment and
consumption. Despite of liberalizing its markets since1991, India has taken a careful
approach in gradually opening up markets and enacting changes after assessing the
consequences on the local market so to mitigate the impact of economic shocks and
contagion in global markets. Hence by its stringent regulation and prudent policies India was
able to survive the crisis.

Page 5 of 10
The Growth and Development of prominent sectors in India
Agriculture Sector: - In India the agricultural sector accounts for about 17-18 % of the
country's GDP. It is one of the biggest contributor but in last few decades it has been
declining. Agriculture has a significant role in Indian policies, not just because of its
contribution to GDP, but because of the enormous number of people who rely on it for a
living like about 58% of population involved. India's agricultural sector has clearly made
significant progress in realizing its full potential. The green revolution resulted in a
tremendous rise in the production of essential food grains as well as agricultural technical
advancements led to rise in new level. There was a time when India had to depend on import
to feed its people like swallowing the humiliation in PL480 wheat from US but now it is a net
exporter of agri food products wheat, rice, barley, millet etc. where in the year 2022 , Agri
export from India is expected to reach the target of US$ 60 billion. However, in order to
overcome challenges in this sector Government with the help of NGOs should involve in
training and mobilizing the underprivileged for procurement of food grains in addition, more
care must be used when drafting state-specific liberalization policies in order to maximize
their benefits. Finally, in the implementation of these reforms for effectively the requirement
for strong governance and political and economic stability is needed.

Industry sector: - Industrial sector has emerged as one of the high growth sector in India.
Prime minister launches the 'Make in India' program to make India as a manufacturing hub
and gave global recognition to the Indian economy. As per the report of ministry of statistics
and programme implementation the India's industrial output in measured of Index of
industrial production (IIP) it stands at 135.2 in December 2021. The Government of India has
taken various measures to improve the capability and competitiveness of industrial form like.
The industrial policy resolution in 1948 where the small scale industry was given importance
and in 1956 policy the industrial sector were divided into three schedule of public private and
mixed. The industrial policy statement of 1977 decentralizes the industries and give priority
to small scale industries it also imposed restrictions on multinational companies. The
industrial policy statement of 1980 address the need for promoting domestic market, selective
liberalization and technological upgradation. The new Industrial policy of 1991 focus on
providing facilities to market forces and to increase efficiency in which larger role were
provided to industries through liberalisation, privatisation and globalisation. To check the
monopoly MRTP act was introduces and Industrial licensing was abolished except for 18
industries. This reforms increases the competitiveness of domestic firms with MNCs and new
imported items hence better quality products.  With the reform on facilitating investment and
establishing schemes to boost domestic investment, the industrial sector is expected to reach
milestone of $1 trillion by 2025.

Page 6 of 10
Source: World Bank, 2021.

Service Sector: - The contribution of service sector in India is lion's share of over 60% in
the country's GDP. In India, the service industry has the largest employment elasticity of any
sector. As a result, it has enormous expansion potential as well as the ability to provide highly
productive jobs, resulting in income generating. The service export of India grew at an
average of 23.5% during 1996 to 2005, slight deceleration from 2005 to 2017 at 9.9 % which
shows India's competitiveness in service related to goods. India has been also a signatory to
the agreement of GATS since 1995 under which it liberalizes its market in certain sector in
order to increase competition resultant in better products. In order to channelize the potential
of this sector, Skill India program intends to reach its target of 400 million skilled individuals
by 2022, India has now become the export hub for software services as is it outsourcing is
expected to witness 6-8% growth between 2021 and 2024. The implementation of goods and
service tax service has created a common market and reduce the overall tax burden. By 2023
it is expected that India's healthcare industry will reach US $ 132 billion and the digital
economy is expected to reach $ 1 trillion by 2025.

Page 7 of 10
Education and Healthcare in India: - In the economic development of any country
expenditure on education and health marks indicates the country's focus on it human skill
development. During the year 1952 to 2015 the education expenditure increased from 7.92%
to 15.7% in India. In the year 2002 the Government of India through 86th constitutional
amendment declared free and compulsory education for age group 6-14 years as a
fundamental right. However according to the census 2011, the literacy rate at India level is
72.9 8% in which the female and male literacy rate is 64.63% and 80.9 % which shows
gender inequality in getting education. In order to improve education sector, The Ministry of
Human Resource Development plans to raise roughly Rs. 1 lakh crore (USD 15.52 billion)
from private firms and wealthy individuals to strengthen the country's education sector. The
Indian government has taken a number of measures, including the establishment of new IITs
and IIMs, as well as the distribution of educational scholarships to research scientists in most
government institutions. Furthermore, with several educational institutions adopting online
learning methods, India's higher education sector is poised to undergo significant changes and
improvements in the coming years.
However, the healthcare has now become the largest sector in term of employment and
revenue it comprises 1.2% of the total GDP and is expected to increase up to 2.5% by 2025.
Between the April 2000 December 2020 the FDI stood at US dollar 17.74% for drugs and
pharmaceutical sector. The country has now become one of the leading destination for
diagnostic service and healthcare upkeep. In the present pandemic period when the whole
world it is struggling from coronavirus the India come with Covishield and Covaxin in order
to fight covid-19. In the post-independence era, India has made significant improvement in
terms of health standards. However, the current health infrastructure is insufficient to meet
the demands of its rapidly rising population in which doctor-to-patient ratio is of 1:700,
which is extremely low. That’s why Tax-free regimes, special interest rates, bank loans
should be implemented and private sector's engagement should be promoted in the healthcare
industry in order to transform healthcare infrastructure.

Poverty alleviation programs by GOI

We have now become the world's five largest economy but the poverty alleviation has
remained India's main challenge. The objective of our policy maker was to promote rapid and
balance economic development in order to provide equality and Social Justice. The
government has followed three dimensional approach in order to alleviate poverty. The first
one is growth oriented approach in which through rapid increase in GDP and increase in the
per capita income of the individual we can eradicate poverty in marginalize section. This was
the major turning focus in the year 1950 to early 1960 in which through rapid
industrialization and transformation in agriculture occurred to promote underdeveloped
region. However due to the population growth and in effective planning the gap between poor

Page 8 of 10
and rich has widened hence poverty doesn't able to trickle down. The second approach has
been initiated from the third five-year plan in which by providing employment and generating
income, additional assets can be provided to working generation.
In this respect various self-employment program like Pradhan Mantri Rojgar Yojana (PMRY)
and Swarn jayanti Shahari Rozgar Yojana (SJSRY) was started in attempted to create self-
employment opportunities by providing financial assistance to low income families.
In August 2005 the parliament has passed a revolutionary act to guarantee wage employment
in every household under Mahatma Gandhi National rural employment guarantees Act
(MANREGA) in which the employment guarantees to every rural household for minimum of
hundred days in a year to make people self-reliant. In the year 2018-19 nearly 5 crore
household get benefited from this employment opportunity. This scheme is now renamed as
Deen Dayal Upadhyay Antodaya. Third approach of government to address poverty is to
provide minimum basic amenities to the people like providing them with food grains,
education, health, water supply and sanitation so the living standard of people could be
improved. The program like Public distribution system, Mid-day meal scheme, Pradhan
Mantri Gram Sadak Yojana and Valmiki Ambedkar Awas Yojana these are the attempts to
provide people with basic amenities. The other schemes like National social assistance
programme for elderly people, Pradhan Mantri Jan dhan Yojana to encourage opening bank
account and Pension to widows are some of the benefits given to people so that poverty can
be effectively removed by bringing them into actively participate in the growth process.
The government is now focusing on improving ease of doing business by removing tax
barrier across state and creating single common market under goods and service tax.
Nowadays government is promoting privatization at large scale in order to reduce the public
sector's workload, provide better goods and services to end consumers, improve the
government's financial situation. This resulted in increasing number of start-up and with ideas
in online retail education digital payment India has now become the entrepreneur hub which
has now created the new ecosystem for incubator and accelerator as new pattern of
consumption in society. In the economic survey of 2019-20 The growth rate of GDP is
estimated to be 5% in 2019-20 as compared to 6.8% in 2018-19 and it is expected to grow at
expected rate in the range of 6.0%-6.5% in 2020-21 and by focusing on the manufacturing,
communication and technology the goal of 5 trillion economies is not far away.  

Page 9 of 10
 Bibliography

 The Hindu
 The Print
 The Times of India
 Sandeep Garg: Indian Economic Development, Dhanpat Rai Publication
 Uma Kapila: India Economy Since Independence, 30th Edition.
 https://ncert.nic.in/ncerts/l/keec102.pdf
 https://www.ibef.org/industry/agriculture-india.aspx
 https://www.investindia.gov.in/team-india-blogs/service-sector-india-
paradigm-shift
 https://www.livemint.com/news/india/a-short-history-of-indian-economy-
1947-2019-tryst-with-destiny-other-stories-1565801528109.html
 https://www.jagranjosh.com/general-knowledge/new-economic-policy-
of-1991-objectives-features-and-impacts-1448348633-1
 https://economictimes.indiatimes.com/news/economy/policy/economic-
survey-2008-09-growth-path-takes-a-u-shape/articleshow/4731114.cms
 https://niti.gov.in/planningcommission.gov.in/docs/plans/mta/mta-
9702/mta-ch6.pdf

Page 10 of 10