JOURNEY OF THE INDIAN

ECONOMY
Indian Economy: Journey after independence
Since 1951, India has grown as a planned economy. The first few plans focused on
growth with strengthening of the manufacturing sector emphasizing heavy industries to
form the backbone of the economy. Other principal areas of planning were agriculture
and social development i.e. housing and poverty alleviation. Over the years India saw a
changing composition of its economic structure: agriculture which initially comprised of
60% of the GDP now comprises around 26% and services comprise a massive 75% of the
GDP growing from 30% in the 50s. Landmark changes in 1991 were brought about under
pressure from IMF and World Bank when India was left with foreign exchanges to barely
support two weeks imports. The new era saw delicensing, massive tariff reductions, FDI
cap relaxations and gradual convertibility of the current account followed by the capital
account. The liberalisation process started in the early nineties has seen massive growth
especially in the services sector. India has consistently grown at more than 6% over the
last five years and in terms of sheer GDP PPP currently stands at rank 4 in the world
according to latest World Bank estimates1. However, when we look at GDP per capita by
PPP we rank at 153 according to the World Bank2. An estimate of Indias growth story
can be made from Chart 1 which plots the growth rate of the economy over the years.
Liberalisation has helped India grow consistently and boost up its forex reserves through
massive inflows of foreign funds both through FDI and FII establishing India among the
worlds top three most preferred investment destinations.

Poverty: A Chronic Problem?

Problems related to Poverty are not unknown in India and can be traced back to any
point in history one wishes to get back to. However in the post-independence era
constructive efforts have been made by the Government of India (GOI hereafter) to lower
the incidence of poverty.
Talking of poverty in India primarily three measures are in use
(i)
(ii)
(iii)

the poverty line (identification)

the poverty gap Index (depth)
the squared poverty gap index (inequality among poor)

The most important poverty treatment programs thus far are: The public distribution
system(PDS) from almost the start of independence (more so after the formation of Food
corporation of India,1964) and later in 1997 the targeted public distribution
system(TPDS), Sampoorna Grameen Rozgar Yojana(SGRY) (2002), Swarnjayanti Gram
Swarozgar Yojana (SGSY) (1999), Integrated Rural Housing Programme( Indira Awas
Yojna) (1999-2000), Pradhan Mantri Gramodaya Yojana - Rural Shelter (2000-01), Prime

Ministers Rozgar Yojana (1993), Innovative Stream for Rural Housing and Habitant
Development, Free supply of tools scheme, National Food for Work Programme (2004),
Rural Employment Generation Programme (REGP) (1995) , Pradhan Mantri Gram Sadak
Yojana (PMGSY) (2000), Integrated Wastelands Development Programme (IWDP) (2004),
Antyodaya Anna Yojana (AAY) (2000), Swarna Jayanti Shahari Rozgar Yojana (SJSRY)
(1997), Valmiki Ambedkar Awas Yojana (VAMBAY) (2001) and most lately, the National
Rural employment guarantee ACT (NREGA), 2006 which has also brought in some of the
previously started schemes under its umbrella.
The number of poverty alleviation programs suggests the importance the government
has always felt towards reducing the menace in order to build a developed society.
However the latest estimates that the poverty situation in India is at best as it was a
decade or two ago. One cant help but ask the question if we are doing enough to
resolve the problem or do we have enough to solve the problem.

Sector development after independence

The Two Phases of Economy

An independent India was bequeathed a shattered economy, widespread illiteracy and shocking
poverty.
Contemporary economists divide the history of Indias economic growth into two phases first 45
years after independence and the two decades of free market economy. The years preceding the
economic liberalisation were mainly marked by instances wherein economic development got
stagnated due to a lack of meaningful policies.
The economic reforms came to Indias rescue with the launching of a policy of liberalisation and
privatisation. A flexible industrial licensing policy and a relaxed FDI policy started getting positive
responses from international investors. Among the major factors that drove Indias economic growth
following the economic reforms of 1991 were increased FDI, adoption of information technology and
an increased domestic consumption.
Service Sector Growth
A major development in the nations services sector has been the tele services and information
technology. A trend that started some two decades back is now well in its prime. Several multinational
firms continue to outsource their tele services and IT services to India. The acquisition of expertise in
information technology has led to the generation of thousands of new jobs, which in turn increased
domestic consumption and naturally, more foreign direct investments happened to meet the demands.
Presently, the services sector employs 23% of the Indian workforce and this process of development
started back in the 1980s. In the 60s, the sector employed only 4.5% of the working population.
According to the Central Statistical Organization, the services sector accounted for 63% of Indian GDP
in 2008 and the figure continues to grow.

Growth of Agriculture Sector

Since 1950s, the progress in agriculture has been somewhat steady. The sector grew at about 1
percent per annum in the first half of the 20th century. During the post-Independence era, the growth
rate nudged about 2.6 percent per annum. Expansion of farming area and introduction of high-yielding
varieties of crops were the major factors of growth in agricultural production. The sector could manage
to end dependency on imported food grains. It has progressed both in terms of yield and structural
changes.
Consistent investment in research, land reforms, expansion of scope for credit facilities, and
improvement in rural infrastructure were some other determining factors that brought about an
agricultural revolution in the country. The country has also grown strong in the agri-biotech sector. The
Rabobank report reveals that the agri-biotech sector has been growing at 30 percent since the last few
years. The country is also likely to become a major producer of genetically modified/engineered crops.
Infrastructure Development
The Indian road network has become one of the largest in the world with the total road length
increasing from 0.399 million km in 1951 to 4.24 million km as of July 2014. Moreover, the total
length of the countrys national highways has increased from 24,000 km (1947-69) to 92,851 km
(2014). Governmental efforts have led to the expansion of the network of State highways and major
district roads, which in turn has directly contributed to industrial growth.
As India needs power to drive its growth engine, it has triggered a noteworthy improvement in the
availability of energy by adopting a multi-pronged approach. After almost seven decades of
Independence, India has emerged as the third largest producer of electricity in Asia. It has increased
its electricity generation capacity from 1,362 MW in 1947 to 1,13,506 MW as of 2004. Overall, power
generation in India has increased from 301 billion units (BUs) during 1992- 93 to 558.1 BUs in 200304. When it comes to rural electrification, the Indian government has managed to bring lights to
5,93,732 (2013 figures) villages as compared to 3061 in 1950.
Progress in Education Sector
Pulling itself out from widespread illiteracy, India has managed to bring its education system at par
with the global standard. The number of schools witnessed a dramatic increase during the postindependence era. The Parliament made elementary education a fundamental right for children in the
age group of 6-14 years by passing the 86th amendment to the Constitution in 2002. At
independence, Indias literacy rate was a paltry 12.2 % which increased to 74.04% in 2011.
The Government launched the Sarva Siksha Abhiyan in 2001 to ensure education for the children from
6 to 14 years. Prior to that, it had launched an effective initiative Sponsored District Education
Programme, which increased the number of schools across the country. In a bid to attract children to
schools, especially in the rural areas, the government also started implementing the mid-day meals
programme in 1995.
Achievements in the Field of Healthcare
A decrease in death rates is considered one of the major achievements that came Indias way in this
sector. While life expectancy was around 37 years in 1951, it almost doubled to 65 years by 2011.

Infant mortality has also seen a marked decline with death rate coming down to half of what it was
during the 50s. Similar improvement was noticed in maternal mortality rate also.
After a long-drawn struggle, India has finally been declared a polio-free country. Malnutrition in
children under five years came down to 44% in 2006 from 67% in 1979. Governments efforts yielded
result as the number of tuberculosis cases also got reduced to 185 per lakh people in 2009. The cases
of HIV-infected people are also witnessing a declining trend. Besides increased public health spending
(about 6% of the GDP), the government has launched a series of ambitious initiatives including
Healthcare for all by 2020 and distribution of free medicines to the people falling under lowestincome group.
Scientific Achievements
Independent India has taken confident strides in its road to scientific development. Its prowess is
being manifested in a gradual scaling up of ambitious projects. India takes pride in its space
programmes, which began with the launch of its first satellite Aryabhatta in 1975. Since then, India
has emerged as a space power that has successfully launched foreign satellites. Its first mission to
Mars was launched in November 2013 which successfully reached the planets orbit on 24 September
2014.
India is also aggressively pursuing both nuclear and missile programmes. That has simultaneously
augmented the countrys defence strength as well. BrahMos inducted into the defence system is the
worlds fastest cruise missile that has been jointly developed by India and Russia. After more than six
decades of independence, India has now come closer to being an independent force to reckon with in
the field of nuclear and missile technology.

How Can Our Nation Be Developed

It is the core value what the citizen of a country creates; shape the picture of a country.
Every country gets a particular status due to values created by their citizen. If America is
a developed country it is due to the visionary entrepreneurs living there. If Japan is a
country with high grade technology it is due to the smart engineers and scientists living
there. If Denmark is a happiest country in the world it is due to the life style of people
reside there. Every rational individual tries his/her best to create value at least for
his/her family. But majority of them rarely have broad vision to take some big steps. It
is misconception that Vision and Mission like words are not relevant for common
person and only big corporate house and government can use it. Due to this

misconception, more than 90% citizen in any country never dares to think big in their
life.

I think that if we work on following directions we can make our country as a Developed
Nation:

Step 1: Make it easy for entrepreneurs

Who took Japan to its heights? Its government did its part, but the bulk load was by its entrepreneurs. The
guys who created Toyota, Honda, Sony, Fujitsu, Hitatchi, Komatsu, Mitsubishi, Fuji, Nissan... In the case of
Germany it was Daimler, Siemens, SAP, BMW and millions of smaller manufacturers. The same for US,
Europe, Singapore and now China.
The ONLY way a country can get out of misery is by enabling its entrepreneurs, who will bring more ropes
to pull out the people. No country has ever became developed without involving its entrepreneurs India is
the world's worst place to do business. I know it both from statistics and cutting my teeth running business
there.
India ranks 132nd in ease of doing biz among 185 economies:World Bank
This can be fixed by dismantling our "License raj". Some of these are easy fixes - make it easy to register a
"Private Limited", have more predictable rules (unlike the infamous "Vodafone" witch hunt) and enable
quick approvals throughout the system. Get the government out of the way.

Step 2: Get the women involved

Our women are under utilized in the process of pulling the people out. We give them useless tasks and don't
get them to fire up. India has among the lowest percentage of women workers in a professional capacity.
India has the lowest workforce participation rate of women among the BRICS
All developed societies had a huge jump in women entering the workforce around the Second World War.
That's how they got developed. If we can get the women to join the workforce - we get twice more hands
and grow twice as fast. It should be simple maths, right?
We need to have a substantial push in getting the women in politics, business and professional workplaces.
If it takes some reservation to do the initial push, let's do it: Is the proposed Women's Reservation Bill (33%
reservation) good for India?

Step 3: Get every child going to a good school

We whine incessantly about our education system. If there was a World Cup in whining, Indians would get
it for their daily complaints on the education system. For all its faults, India's best schools fill up Wall
Street, Silicon Valley, Canary Wharf, Mckinsey, Microsoft, Harvard and Oxford. In a dozen places I studied,
I don't of know a single friend who is not doing well. Thus, the primary problem is less in our best schools,
but the fact that 95% of the population don't have access to good schools.
If we can get every Indian kid to have the standard of education of even a Kendriya Vidyalaya or DAV or
DPS, India can have a 20X boost in productivity. That means more schools, more good teachers, better
tech.

Step 4: Time to add more judges and police

India has too few courts and judges. Added with archaic laws and processes, we have a dysfunctional
judicial system. When the judiciary is dysfunctional, society cannot progress. Enable legal reforms to
simplify the processes. But, more importantly add 1000s of judges and millions of new policemen. We
cannot have better security until our police and judiciary levels reach international levels. First, fix the
quantity and then fix the quality.
Acute shortage of judges at all levels ails our judicial system
Indias Police Force Lags Much of the World

Step 5: Fighting graft (corruption)

This is a complex process and there is no one-step silver bullet.

Step 6: National level skill development

In the next 20 years, we need to bring out 500 million people out of agriculture. I have said this many
times. We don't need 600 million people working in farming. It is again simple math - if 600 million
people are required to produce food for 1.2 billion people, we either have to drastically push up food
prices or have the farmers live in poverty.
However, if 100 million people can produce food for 1.2 billion people, the farmer salaries can go up 6X
without pushing up food inflation. Simple, maths right? And all developed economies have pulled this
off. This is not rocket science.
Now, what will these 500 million people do for a living? This is where we need a national level skill
development. Let us produce new industrial workers, new accountants, new doctors, new mechanics,
new drivers... Millions of Indian businesses are suffering from not having access to quality people. In
our family business everyday there is a struggle to find quality people.

Step 7: Improve Public Participation in Planning making Process:

We can improve the Government Planning process by increase in Public Participation and this is
possible when different Organizations and Association will not only provide inputs for public
policy but also participate in policy making Process.

Step 8: Increase Export and reduce import

We can increase our Export and reduce import only when more and more Product or Service
Provider companies will adopt Global approach

Step 9: Reduce misuse of money and Power

We can reduce misuse of money and Power at Government and Administrative level by making

knowledge societies.
Though there are many activities required to Promote India as a Global Brand but we have selected
3 activities to concentrate:
1. Motivate Ambitious Entrepreneurs through different ways to adopt Global Approach,
Benchmarking, and New Age Technologies
2. Provide Knowledge Management Support to Export Oriented / or Import substitute Products
and Service Provider companies to attract FDI in such areas where we actually required.
3. Promote Subjective and Objective Values of our country through different Media,
Entertainment, Tourism, Publishing and Educational based platforms.

MAKE IN
INDIA
Make in India is an ambitious call by Prime Minister
Narendra Modi for foreign companies and our Government

is working hard to make it success. Many countries have

also shown their interest to be a part of this initiative. Make
in India call may attract foreign companies to come with
capital, technology and other resources but they will come
with their own interest. Multinational Companies see India
as a big market for their products and services, they just
like to sell their products or services and earn profit. Just
making in India and selling within India can't transform our
economy.We can't make our country as a pasture for
them. We will have to redefine Make in India call so
that our Goal should be to develop India as a Garden
not a pasture. A Garden that will attract foreign
companies with the flowers like trained and skilled
manpower, Resources and other facilities and to
pluck these flowers they will have to pay for it. Only
then we can make our country as a Developed Nation.