According to Mahatma Gandhi, "You must be the change you wish to see in the world".1 As a country, India must have decided that one of the changes it wants to see is massive economic development since it has managed to achieve just that. Once a nation with relatively low earnings, India has turned around its luck and become one of the world's leading economies. Continue to read to discover just how much India's economy has grown over the past 75 years or so.
Economic development of India after independence
India gained its independence from the British on 15 August 1947. In the years since, the country has recorded significant growth in several areas, particularly regarding economic development. There has been massive progress towards increasing income levels, living standards and agricultural production, among others. Consequently, India is classified as a new emerging economy (NEE).
Other NEEs, include Brazil, China and Nigeria, to name a few.
Manufacturing industry
India's industrial development has been spectacular since its independence, primarily driven by the government eliminating industrial licensing, which opened the sector to private entities and foreign investment. This allowed the nation to become one of the world-leading producers of various products.
India is now a major pharmaceutical manufacturer (accounting for about 20% of total global pharmaceutical exports) and the world's largest provider of generic drugs by volume. India is also the largest vaccine supplier in the world.
The Serum Institute of India Pvt. Ltd is the world's largest vaccine manufacturer by the number of doses produced and sold worldwide (>1.5 billion). The company's vaccines are used in 170 countries, and it has been estimated that 65% of the world's children have received at least one vaccine it manufactured! Some essential vaccines produced by the Serum Institute of India include, but are not limited to, polio, tetanus, measles, rubella, BCG and COVID-19.
Fig. 1 - a vial of Covidshield vaccine produced by the Serum Institute of India
Agriculture
The Green Revolution in the 1960s bolstered India's technology and ability to produce high-yield seed varieties. This raised agricultural productivity. Food grain production in India increased from 48 million tonnes in the 1950s to 241 million tonnes in 2017. India is one of the world's largest producers of rice, wheat and some fruit and vegetable crops.
Service Industries
Financial services, tourism and retail industries embraced the expansion of technology in India. This has allowed them to increase their contribution to the economy. It has been estimated that the value added from services in India grew from £2.7 billion (US $3.1 billion) in 1950/51 to £268.7 billion (US $310.2 billion) in 2018/2019.
Globalisation and economic development in India
In India, globalisation started in the mid-1980s and was fueled by changes in government policies. Specifically, reducing trade barriers, such as tariffs by the government. It gained momentum in the 1990s and opened the Indian economy to free trade and external flows. Globalisation in India impacted its fiscal development positively, resulting in significant exports, outputs and income growth while decreasing unemployment. In fact, between 1950/51 and 2018/2019, the value of India's exports rose from £0.1 billion to £286.1 billion.
Globalisation refers to the growth in the world's interconnectedness due to trade, politics and cultural exchanges.
Indicators of economic development in India
Many indicators can be used to show economic development in India. However, the three you will learn about are gross domestic product (GDP), national debt and unemployment rate.
Gross domestic product
It is estimated that India's GDP has grown 2.47 times since 2004/2005. In 2021, the country's GDP was £2.75 trillion (US $3.17 trillion), ranking it 6th worldwide. India currently contributes 3.25% of the entire world's GDP. The GDP growth rate was 8.3% in 2021.
GDP per capita
India's GDP per capita has increased exponentially from £71.25 (US $82.2) in 1960 to £1,974.08 (US $2,277.4) in 2021. Despite this significant increase, India's per capita income remains one of the lowest in the world.
GDP per capita is the GDP divided by the midyear population to determine the value of the goods and services produced per person.
Fig. 2 - world GDP per capita 2021
National debt
In March 2022, India's total external debt was £538.1 billion (US $620.7 billion), which was £40.8 billion (US $47.1 billion) more than in March 2021. Despite the growth in actual debt figures, the country's debt to GDP ratio decreased from 21.2% to 19.9% over the same period. This is a testament to the extent of the GDP growth experienced in India.
Unemployment rate
From 2018 - 2020, India's unemployment rate ranged from 5.0% - 23.5%. The latter occurred in April 2020 as a result of the COVID-19 pandemic. In August 2022, India's unemployment rate stood at 8.3%.
Most economically developed state in India
The most economically developed state in India is Maharashtra, with a gross state domestic product (GSDP) of £317.9 billion (US $366.7). Perhaps this should not be surprising since the state capital, Mumbai, is India's economic capital. While services, agriculture and industry all constitute the state's economy, Maharashtra earns 46% of its GSDP from industry and contributes 13.9% of India's total earnings. In August 2022, the unemployment rate in the state was 2.2%, ranking among the lowest in the country.
Maharashtra is located in western India and is the largest and one of the most urbanised states in the country. Maharashtra's capital, Mumbai, is home to the headquarters of almost all of India's major financial institutions. It is also home to the oldest stock exchange in Asia and the largest stock exchange in India, the Bombay Stock Exchange. Although making most of its earnings from manufacturing, agriculture is still an important sector, employing about 24% of Maharashtra's working population.
Fig. 3 - Bombay Stock Exchange, Mumbai
Impact of population growth on economic development in India
Economic development in India is impacted by population growth in both a positive and a negative way. On the positive side, India's growing population has provided a large workforce, facilitating increased productivity in the industrial and agricultural sectors. This has allowed income growth. India's workforce is also highly skilled; therefore, it can easily attract foreign direct investment to bolster its economic growth.
On the negative side, while the economy has grown, it cannot be denied that certain aspects of India's economic development have lagged behind other countries, such as China. While the large population size has facilitated the overall total growth of the economy, per capita income in India is very low, which is arguably the biggest economic problem the country faces. The nation ranks 144 out of 194 countries in terms of per capita income. Additionally, India has a significant dependent population because of high birth rates, which burdens the working population. Furthermore, India's massive population size has affected its capital formation. This is because more resources are needed to meet the growing population's needs while leaving fewer resources to increase the economy's productive capacity. Moreover, the large population has had other adverse effects in India, such as food shortages and environmental degradation, to name a few.
Barriers to economic growth in India
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