India is a lower middle-income country situated in South Asia that has been growing at over 5 per event per annum since 1991. Here we take a look at India’s growth story and the problems its economy faces.
India became an independent country in 1947. It was a British colony for over 200 years. The colonial powers set up two types of colonies – extractive and settlement. India was an example of the former while countries such as America, Australia were examples of the latter.
The British didn’t as a consequence have any interest in developing India. It was used as a resource hub for industries in England. India would export raw materials to England and import finished items.
After independence, wary of foreigners, India became a closed economy. It had high trade tariffs and a heavily regulated economy. The period lasted until 1990 and it came to be known as the “License Raj”, as to carry out almost any economic activity, entrepreneurs needed the government’s permission. This stifled investment and productivity growth.
In 1990, the country had to approach the IMF for a bail-out when it found itself in a balance-of-payment crisis. The IMF helped the country and asked it to reform its economy.
Under the stewardship of the then finance minister, Manmohan Singh, India opened its economy. This entailed depreciation of the Indian currency, i.e. the “rupee”, reduction of trade barriers among other reforms which were extremely successful and the country experienced high growth.
Today India is a major player in several sectors. It is hard to imagine such success of the Indian IT industry if India had remained a closed economy.
One of the major economic problems India faces, is unemployment. Inflation is another problem facing the country. The tax system has been reformed with the introduction of Gross Sales Tax (GST).
Characteristics of Indian economy
According to the United Nations, a country is considered as under developed if it has a real per capita income which is less than 25% of that of USA.
Countries with high per capita income, high HDI index, technologically and industrially advanced are known as developed economy. Norway, Japan, Switzerland, Australia, Germany, USA, Canada, Sweden, UK,Denmark etc. are considered as highly developed countries.
Importance of agriculture
In developed countries only 2-5% of the labour force is employed in agriculture. In India around 60% workforce is engaged in agriculture.
Useful Links
Asian Development Bank Report: Economy of India
World Bank Data: India Region
India-Economy Analysis IBEF Analysis
- https://www.ibef.org/economy.aspx
- https://www.ibef.org/economy/indiasnapshot/about-india-at-a-glance Economy of India
- https://www.ibef.org/exports.aspx EXIM Data
- https://www.ibef.org/industry/indian-consumer-market.aspx Consumer Durables Data
More useful links
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