India a country with diverse background and rich
culture has managed to stand apart and create a space for itself in the global
arena. India is one country that has been under British rule for several long
years and since independence we have grown tremendously on various fields. The
pace and momentum of our growth have been quite reasonable considering the
fundamental nature of our economy. India witnessed rapid growth since 1991 with new economic reforms and policies
that made India realize its true potential role on the global stage. The new
economic policy that opened way to a whole new world of trade and business
development made India an emerging and desired nation with full of opportunities.
The slow but steady transformation of our economy has helped us to survive in
an age of increasing risks and crisis around the world. The Indian growth story
is in no way seem to be a miracle, it took years for us to realize this
development, we are only half way through and we still have a long way to go in
achieving our dreams.
As a part of the emerging nation we know
that India has grown leaps and bounds and was able to create a niche space on
the global platform. The country has witnessed rapid changes from technological
to infrastructural development, healthcare to space research, education to
business development and so on and so forth. Gross Domestic Product (GDP) is
the standard measure of growth and we have been able to achieve a highest GDP
rate of above 9 percent. Over the years we have seen big changes in both
manufacturing and service sector that contributed the GDP to rise. But is this
what the real growth means? Does GDP alone tell us the real growth of an
economy? The answer is no. GDP is just one of the indicators that could tell
the actual growth of a nation. Standard of living, Cost of living, literacy
rate and many other small factors would indicate the real development of a
country. In this article we will look at the India’s growth story in two parts.
In the first part we will see the growth of India in more generalized form, the
factors that contributed to high GDP rates in the last few years, which is the
sole concern of politicians and think is the true growth indicator. In the
second part we will see how India has been growing in specified form, which
highlights the true growth path of India.
The growth and economic development of India
since independence have been robust. The Indian growth story is quite pragmatic
compared to its other Asian counterparts. India not only sacrificed its
resources and blood during the British rule but also gained and learned equally
much from them. The railways, telegram and postal system are very good examples
of what we gained from the Britishers and perseverance and unity is what we
learned from the freedom struggle. The British rule has given India the boost
of industrial revolution and urge to infrastructural development. Over the
years, particularly after 1991 India has grown tremendously in industrial and
manufacturing output. This has been the major growth driver followed by retail,
FMCG and
service sector in the recent years. India is tenth in the world in factory and
manufacturing output. The economic reform introduced in 1991 brought increasing
foreign competition resulting in a continuous dynamic nature of the economy.
Post liberalization, the Indian market offers endless possibilities for foreign
investors which encouraged the business scenario of our country. India is
fifteenth in service industry where the Indian Information Technology industry
contributing significantly to the balance of payments but accounts for only one
percent of the total GDP. Post the new economic reform the Indian consumerism
has seen heightened changes as people started to increase their spending
pattern as a result of increasing disposable income.
India saw the beginning of the 21st
millennium as a new beginning of Indian economic development. It started to
look for all the opportunities that would help accelerate the growth rate. It
has managed to achieve a high growth in the last decade. The rural consumption
demand has grown in the recent years and contributed significantly to the high
GDP post the global crisis when the urban demand was declining. In the last
eight years India achieved an average growth rate of 8.7 percent on the back of
wide ranging structural and policy reforms and also growing integration with
the global economy. By 2008 India was fourth largest economy in terms of
Purchasing Power Parity (PPP), an economic theory that explains the long term
equilibrium of exchange rates based on relative price level of the two countries.
For a nation that once believed the Hindu rate of growth (low annual growth
rate of a socialistic economy) was its destiny, this remarkable growth performance
has triggered aspirations for double digit growth rate. On the progress of
economic development India started to encourage private players who played a
key role in India’s growth story, infrastructural development and foreign
investment. As a result, India emerged as a potential player on the global
platform. This paved way for increasing competition in the domestic market and
scope for foreign trade. Though this high growth octane made India as one of
the powerful emerging economy and helped see economic prosperity it has also
come with some economic costs such as high inflation, trade deficit, widening
CAD and weakening rupee as result of global turmoil. The once growing Indian
economy is now facing declining GDP rates in the past two years as a result of
increasing domestic and external pressures. The following graph shows the annual GDP in percentage since 2000.
India though has seen tremendous changes
and growth it still lags behind many other developing nations on various
fronts. One of the greatest problems of India is poverty. This one factor makes
me wonder what is the use of India growing in terms of technological
advancement, infrastructural development and high industrial production when a
certain section of the society struggles even for one meal a day. India
constitute a third of the world’s poor. In 2010 the World Bank reported that
32.7% of the total Indian population falls below the international poverty
line. It is a great shame that even after 65 years of independence India still
can’t eradicate poverty. The poverty in India is also primarily because of
income and wealth inequality. The distribution of wealth is highly uneven in
India contributing to the increasing poverty. The Ginni Index is a measure of
income inequality and India as per 2011 has a Ginni coefficient of 35.6%.Unrealistic poverty line estimate also add to the woes. But
there is some good news about the poverty. According to the recent National
Sample Survey Organization (NSSO) the poverty levels across India is down by 15
percent in the past eight years. The findings stated that rural poverty
declined at a faster rate than urban poverty. India is ranked at 134 out 234
countries in HDI. The HDI is a measure of education, health, standard of living
and income parameters. India falls under the category of medium human
development index. India despite rapid economic growth in the last decade has a
very low per capita income making it the poorest country among the G20 nations.
On literacy, India is ranked at 168 out of
234 countries. On Quality of Life Index India ranks at 77 out of 111 countries.
Corruption is one serious issue in India because of which development is
stagnant and we are partially hidden from the potential growth. India ranks 95
out of 178 countries in corruption. The Organization for Economic Cooperation
and Development for international student assessment program ranked India at 72
out of 73 on global educational survey on account of poor performance by the
Indian students. The Indian education system has undergone serious criticism and
the future development of the system is a matter of concern as India constitute
more number of young population. The poor status of Indian education system is
evident as none of our universities are ranked even among the top 200 global
universities. India is also one of the countries with huge levels of pollution
and carbon emissions. As an emerging nation it produces a large amount of
industrial wastes and toxic materials causing severe environmental damages.
Over the years in the process of achieving high growth we have ignored the
nature around us by exploiting it which has a serious cost to pay. The recent
Uttrakhand floods is an example of natural disaster caused by human
intervention and exploitation rather than climate change. The OECD report also
stated that it is very difficult doing business in India as result of slow
clearance. India is ranked at 173 on this regard. Though, India was able to
achieve a reasonable growth and witnessed rapid changes in infrastructural and
economic development it has not generated equally much jobs because of which
our unemployment rate is at 9.8 percent, much beyond many other Asian countries.
The Indian economy at present is
undoubtedly at a mess with declining growth rate, depreciating rupee, high CPI
inflation, poor investment outlook and widening CAD. No wonder India requires a
restructuring in policy measures and decision making. Changes in policy reforms
to revive India’s growth is the need of the hour. The Keynesian theory states that during economic downturn the government should increase its expenditure to compensate for the decline in the private demand for goods and services and during an economic boom the government should reduce its expenditure to make room for productive investment and consumption. Some of the correctives
recently desired are reliable laws, renewed investor confidence, more efficient
government spending, rationalization of taxes, lower interest rates and perhaps
more FDI. The latest hike in FDI cap in key sectors is a significant move in
boosting investor confidence and improve the growth prospects. Rapid and
inclusive growth in the medium term does not look too likely looking at the
unattended constraints. But this current economic slowdown can be seen as an
opportunity to grow with a new start as the 1997 Asian financial crisis served
as an opportune for India to grow. The pessimism surrounding the economy and
the downturn is also because India became too complacent as a country. India
seriously needs to address the concerns of farmers and encourage agricultural
production. Unless due importance is given to agriculture India can’t achieve
inclusive and sustainable growth. India also ignored the needs of small
producers not just farmers, who form the bulk of employment and production. We
have simply focused on the big corporate guys leading to slow or falling
productivity. The fastest way to raise the average productivity is to raise the
productivity at the bottom. The present macroeconomic problem of twin deficit
has also raised questions about the future growth trajectory of India. Hence to
restart the engine of India’s growth story it is highly necessary to look at
the issues at the bottom level and restructure our policy reforms to meet the
various needs of all the economic agents.
