India’s Independence did not only awaken individual dreams, but also opened development opportunities — economically, socially, and politically. On the 15th of August 1947, the Indian peninsula had a new beginning as a country but there were many monumental tasks to be completed by the then-newly formed government. India’s independence was in itself a turning point for India’s economy and its transformation. Seventy-five years later, India seeks to join the $5 trillion club soon. As former prime minister Manmohan Singh put it: “The brightest jewel in the British Crown” was the poorest country in the world in terms of per capita income at the beginning of the 20th century.
Before independence, the much prevalent British dominance drained the country of its natural resources, capital, and labour. India was hopelessly poor as a result of the constant deindustrialization by the British. The vivid social diversity and the exponentially growing unemployment and poverty rates questioned India’s survival as a nation itself. Cambridge historian Angus Maddison’s work shows that India’s share of world income shrank from 22.6% in 1700 (almost equal to Europe’s share in 1700 of 23.3%) to 3.8% in 1952.
Then prime minister, Jawaharlal Nehru, introduced an economic model that envisaged a dominant role of the ruling government as an all-pervasive entrepreneur and financier of private businesses. The Industrial Policy Resolution of 1948 proposed an economic system that would blend elements of a market economy with elements of a planned economy, free markets with state interventionism, or private enterprise with public enterprise: a mixed economy. Earlier, the Bombay Plan, proposed by eight influential industrialists including J.R.D Tata and G.D. Birla envisaged a substantial public sector with state interventions and regulations in order to protect indigenous industries. The political leadership believed that since planning was not possible in a market economy, the state and public sector would inevitably play a leading role in economic progress.
The Planning Commission was set up in 1950 to oversee various aspects of economic planning, including resource allocation, implementation and appraisal of the five-year plans, and more. The five-year plans focussed on economic and social growth, modeled after those existing in the USSR. India’s first five-year plan was launched in 1951, and it centralized agriculture and irrigation to boost agricultural outputs as India was running out of its foreign reserves on food grain imports. The first five-year was successfully accomplished, with the economy growing at an annual rate of 3.6%, beating its primary target of 2.1%.
Though shortly after, India suspended the five-year plans, drawing up annual plans between 1966 and 1969 instead. This was because India was not in a state to commit to long-term provision of resources. The diversion of capital to finance the war with Pakistan, the below-par growth outcomes of the Third five-year plan, and the then-ongoing war with China, had altogether left the Indian economy with little. The approaching monsoon showers worsened food shortages, causing a steep spike in inflation. The government needed to import food grains and seek foreign loans, and this posed a serious threat to India’s political economy: spiking inflation hand-in-hand with increasing foreign debt.
India’s Economy Now
Though in recent years, the rise of the Indian economy is best depicted in BSE’s Sensex; the 30-share benchmark index. The 30 component companies represent segments of all the sectors of the economy. From a small 1,955.29 points in 1991, the Sensex touched an all-time high of 40,312.07 points on June 4, 2020. Even with the rising taxation on capital gains and investments, India is a country obsessed with cash-driven gold and real estate. These are slowly veering towards investing in a more formal and organized equitable market. Over the past decade, numerous start-ups have budded across the country as young entrepreneurs experiment with investments, technology, and sophistication all side-by-side. The rise of these start-ups has created an ecosystem of new partnerships, venture fundings, along with diversified patterns of consumption in Indian society.