India, frequently referred to as the largest democracy in the world, has drawn attention from all around the world as a result of its incredible economic progress in recent years. India's growth trajectory makes for a fascinating research, given its broad economic landscape and rapidly expanding population of nearly 1.3 billion people. We'll look at the causes of India's economic expansion, the opportunities it presents, from its independence in 1947 to the present day, India has undergone significant transformations, propelling it onto the global stage as one of the fastest-growing economies. Before the COVID-19 pandemic, India's GDP growth rate had been averaging around 6-7%. However, like many other countries, India experienced a significant economic downturn in 2020 due to the pandemic. The GDP contracted by approximately 7.3% in the fiscal year 2020-2021 due to lockdowns and disruptions in economic activity. India's major economy continued to grow at the fastest pace in the world in the last nine months of 2023, rising 8.4% from the previous year. TWO GROWTH PHASES OF INDIA • 1950-2014 since a "decade of transformative growth." • It underlines that structural limitations, slow decision-making, and high inflation meant that the economy was "far from encouraging." • Post 2014 reforms, the economy is starting to grow healthy again, making India the fastest-growing G20 nation. Qualitative Superiority: According to the assessment, India's 7% growth (while the global economy grows at 2% annually) is "qualitatively superior" to the 8%–9% growth reached in the period before it, when the world economy grew at 4% annually. 1950s: Post-Independence Economic Strategy In the 1950s, the Indian government implemented a plan focused on reaching independence from money. Fast industrialization established large state-owned businesses (SOEs). The average growth rate during a decade (1952–60) was 3.9%. Challenges in the 1960s o The 1962 Sino-Indian war. o 1965-66 India-Pakistan war. o Severe drought in 1965. Initiatives for Reform in the 1980 Price controls are removed, fiscal reforms are started, the public sector is transformed import duties are decreased, the domestic industry is de-licensed, and exports are encouraged. The 1980s also saw an emphasis on export promotion and increased connectivity with the global economy. A combination of substantial government investment and moderate liberalization improved GDP growth, which peaked in the 1980s at 5.7%. External Shocks in the Early 1990s Between 1990 and 1991, the Iraq-Kuwait war negatively impacted trade and upset current account balances. A Balance-of-Payments (BOP) crisis occurred in 1991 as a result of the external crisis, unsustainable government expenditure, and internal sociopolitical causes. Reforms of 1991 1. Liberalization: Removal of government controls and regulations to encourage market competition. 2. Privatization: Transfer of state-owned enterprises to private ownership to enhance efficiency and productivity. 3. Globalization: Opening up of economies to foreign trade and investment to integrate with the global market. 4. Deregulation: Reduction of restrictions in various sectors to promote innovation and growth. 5. Stabilization: Implementation of measures to control inflation, stabilize currency, and restore economic stability. Reforms in India Encourage Growth and Capital Flow • The goal of the Sarva Shiksha Abhiyan (SSA) was universal education. • National Rural Health Mission (NRHM): Designed to meet the needs of rural areas in terms of health. • To create jobs in rural areas, implement the National Rural Employment Guarantee Scheme (NREGS). • Decadal Average Growth Rate: During the 2000s, the annual growth rate was 6.3%. Issues in the Indian Economy prior to 2014 • GDP growth of under five percent • High inflation in the Wholesale Price Index (WPI) for food items highlighted the limitations of the structure. A Decade of Transformative Growth, 2014–2024 1. From 2014 forward, structural reforms and macroeconomic fundamentals • Several structural changes were launched by the Indian government to enhance the foundations of the macroeconomic system. • India's GDP is expanding at fastest rate among the G20 countries. • 7.3% growth is anticipated in 2023–2024, up from 9.1% in FY22 and 7.2% in FY23. 2. Post- Pandemic Recovery and Employment Creation • The urban unemployment rate decreased to 6.6%. Since May 2023, • The proportion of net new Employees' Provident Fund Organization (EPFO) subscribers in the 18–25 age range has continuously surpassed 55% of the total net new EPF subscribers. 3. Infrastructure Development • Air, rail, and road networks are expanding at record speeds. • In the past nine years, 74 airports have been constructed, and from 723 in 2014 to 1,113 in 2023, there have been more institutions. • Girls' Gross Enrollment Ratio (GER) rose from 12.7% in FY10 to 27.9% in 2020. • The total number of students enrolled in higher education increased from 3.4 crore in 2014 to 4.1 crore by 2023. 4. Efficient Handling of Crude Oil and Financial Support • In FY23, the government gave states a ₹1 lakh crore, 50-year interest-free loan; in FY24, it announced another ₹1.3 lakh crore. • In the first eight months of FY24, states used over ₹97,000 crore of the ₹1.3 lakh crore interest-free loans for capital investment. 5. States' Increase in Capital Expenditures • Compared to the same period in 2022, state capital expenditures grew by more than 47% in the first half of April–September 2023. • Anticipated improvements in external current account and fiscal balances suggest a decrease in macroeconomic concerns. To achieve and maintain stability, the government and the RBI have implemented a comprehensive strategy, encompassing supply-side initiatives, fiscal measures, and inflation targeting, despite facing several obstacles.
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