India has emerged as the fastest growing world economy today running neck-andneck with China and is often described as the bright spot in an otherwise slowing world economy.
The country’s economy has come a long way since its first prime minister, Jawahar Lal Nehru, set out on the path of setting up Soviet-style public sector factories in the power and steel sectors to kickstart the country’s economic development after Independence.
Today, India is a $2.61 trillion (`180 lakh crore) economy that has set an ambitious target of doubling the GDP size to become a $5 trillion digital economy by 2024. This is indeed a phenomenal leap compared to the mere `2.7 lakh crore economy it was in 1947. During the initial days when the commanding heights of the economy were in the public sector, there were only around 100 companies in the country.
The industrial base has grown manifold since then and covers over 5000 large companies listed on the stock exchanges today. The changes in the Indian economy in these 72 years took off after the watershed moment of liberal reforms introduced after the foreign exchange crisis in 1991.
The tectonic policy changes were announced by then finance minister Manmohan Singh to open up the economy after the country ran into a foreign exchange crisis. India was forced to mortgage 47 tonnes of gold to foreign banks to raise $ 400 million as it had run out of foreign exchange to finance essential imports such as oil and fertilisers.
In sharp contrast to this humiliating situation, today our foreign exchange reserves stand at a staggering $429 billion. The reforms got rid of the licence-permit raj which had stifled entrepreneurial spirit and choked the economy to what came to be known as the Hindu rate of growth of around 3 per cent or less.
There was an acute shortage of funds due to which the country’s highways were in a neglected state and posed a severe bottleneck to economic development. It was during the Atal Bihari Vajpayee government’s tenure in the late nineties that things suddenly changed. A cess on petrol and diesel was introduced which mobilised sufficient funds to finance highway development.
This was an important milestone in the country’s economic development as the allocation of funds to the cash-starved sector suddenly shot up due to the collections from the cess on petrol and diesel. A whole lot of highways and expressways were built and even smaller village roads were paved to ensure better connectivity.
India was even three decades after independence still dependent on the old Fiat and Ambassador cars with outdated technology of the sixties. There was a thriving black market in cars and scooters as the demand! It was in the early eighties that Maruti Suzuki emerged as a game-changer.
This was followed by other companies such as Hyundai from South Korea and later the bigger Japanese car giants such as Toyota and Honda, who also set up factories.
At the time of independence, the productivity of Indian farms was low and agriculture was critically dependent on the rains. Any weak spell in the monsoon would lead to food scarcity and India had to resort to food imports from countries such as the USA.
The problem of scarcity has now changed to one of managing abundant production as the green revolution of the midsixties based on high yielding varieties of seeds, chemical fertilisers and mechanisation of agriculture has spread across the country.
The sector was in a bad shape and communication was a big obstacle in the way of efficient functioning. There were long waiting lists to get a telephone connection. However, with the telecom revolution driven by technological changes from the West, mobile smartphones have made communication instantaneous.