Growth Performance of Indian Economy from 1947 to 2020

 Indian growth performance can be divided into 3 parts during 1947 to 2020- from 1947 to 1991 when India experienced Hindu rate of growth of 3.5%, from 1991 to 2008 when India experienced high growth rate of 8% as a result of structural reforms which was broken due to global financial crisis of 2008, and from 2012 to 2020 when India has recovered from the crisis and is undergoing structural reforms.

In the first phase, the agricultural sector remained primitive, the industrial sector was largely restricted to public sector, the service sector was largely absent due to a closed economy. Although growth performance in this phase was largely limited, a strong industrial base could have been created through large investments by the public sector.

From 1950-51, the sector-wise GDP contribution was:

Agriculture- 59%

Industry- 13%

Tertiary- 28%

Agriculture sector made a landslide contribution because a majority of Indian population was employed in agriculture. Disguised unemployment limited economic growth in this period.

In 1991, the GDP contributions were:

Agriculture- 30%

Industry- 30%

Tertiary- 39%

The predominant GDP contribution shifted towards services due to initiation of reforms between 1980-1991. The contribution of industry also increased to 30% due to large infrastructure projects implemented by the government between 1951-1991. Major mistakes made were ignorance of agriculture sector till 1966, License Raj System hindering growth of the private sector and leading to Red-Tapism. Monopolistic and Restrictive Trade Practices also affected growth in Phase 1.

After 1991, there were major reforms in the form of Liberalization, Privatization and Globalization resulting in a successful growth story for India. Due to LPG reforms, India witnessed steady emergence of tertiary sector as the dominant sector in the second phase.

From 2010-2011 onwards, the GDP contributions were:

Agriculture- 16.8%

Industry- 25.6%

Tertiary- 57.6%

Major contribution was made by the tertiary sector. The manufacturing sector was unable to cross the 30% mark in India’s GDP contribution. Landmark initiatives like ‘Make In India’ were initiated since 2014, transforming India into a manufacturing hub, boosting growth of services sector.

The Global Financial Crisis of 2008 had a deep impact on the GDP growth of India due to a fall in exports, rise in import bills and inflation.

After the financial crisis of 2008-11, Indian economy recovered as a consequence of Structural Reforms 2.0. Under the reforms, manufacturing has been given a renewed focus through schemes like ‘Make in India’ and MUDRA loans. Steps like industrial and labour law reforms have been taken to enhance ease of doing business. In agriculture sector, focus has been shifted from farm to farmer, and crop security to income security via PM KISAN, crop insurance scheme, doubling farmers income by 2022. Medical tourism, travel and transportation have been given a new push to further increase contribution of service sector to India’s GDP in Phase 3.

From 2019-2020, the sector-wise GDP contribution was:

 Agriculture- 16.5%

Industry- 29.6%

Tertiary- 55.3%

The share of industry increased due to renewed focus on manufacturing in India.

Despite the COVID-19 crisis, India is one of the best performers in the world due to strong fundamentals and a strong domestic demand. A sustainable growth rate of 8-10% can make India a $5 trillion economy in the near future.