India is one of the fastest-growing economies in the world. India is the home of roughly 1.3 billion people. The journey of India from being one of the poorest countries to the fifth-largest economy is quite interesting. Some analytics say that the Indian economy could expand at an unbelievable rate. But there are still a lot of things that are putting questions on India’s economic growth in the future. Higher unemployment rates and economic inequality are some of the major problems. But even with all these problems, the Indian economy has grown in the last few decades. It has lifted more than 271 million people out of poverty. But the question now is, can the Indian economy grow at the same speed in the future? Or what is slowing down the growth of the Indian economy?
History of Indian Economy
Let us begin with the history of the Indian economy. India was a former British colony. British rule in India ended in August 1947. In these 200 years of rule, India was looted by the Britishers. India’s share in the world economy was 24.4% in 1700, but it went down to 4.2% in 1950. After 1947, the Indian economy was broken completely. So, to start the economic growth, India adopted the soviet economic model. This model brought a five-year development plan and nationalizing major industries like mining, insurance, and banking.
Growth of Modern India’s economy
After 1991 reforms, India adopted an economic policy of LPG. After these reforms, India saw massive economic growth. India’s private sector showed a huge boost and created millions of jobs. Particularly India’s IT sector was growing by 2007. India’s IT sector was generating 23 billion dollars and by 2018 it was generating 167 billion dollars. IT sector has increased its contribution to India’s GDP from 1.2% in 1998 to 7.7% in 2017. The Indian economy has grown nine times since 1991. In 2019, India surpassed the UK as its former colonizer GDP.
What slowed down the economic growth of India?
For the last few years, the Indian economy is struggling to keep up with its higher GDP growth. India’s automobile construction and agriculture sector has been hit hard and there are many reasons behind that. One of the major reasons is the banking sector. While going through economic growth, Indian banks have given massive loans for businesses and infrastructure projects. But some customers fail to repay their debt and due to high non-profitable asset banks are now hesitating loans for businesses.
The trade war between China and the US slowed down foreign investment. Also, India’s GST implementation for tax collection damaged the small businesses. Yet, it was a good move for the economy in the longer run. We could see the benefits of implementing GST in the coming years, but in the short run, it has done damage. Some economists also blame the government for its demonetization stunt in 2016. This demonetization resulted in a disturbance of cash flow in the economy. So, the government failed to notice all these problems. Due to this, India’s GDP in the third quarter of 2019 was 4.7%. This was the lowest GDP since 2013.
Today India’s unemployment rate is the highest in the last 45 years. Also, the damages to the economy due to the covid-19 pandemic are major.
Q1. What is the impact of COVID-19 on the Indian economy?
Ans- Because of the COVID-19 pandemic, all the industries were shut down. Due to which there was a huge loss on marketing terms. This decreased the Indian economy by a great percentage.
Q2. What is the goal of the five-year plan?
Ans- The five-year plan focuses on growth and modernization. It was introduced to increase the GDP of the country.