Evolution of the Indian Economy

After gaining independence from British rule in 1947, India began rebuilding its economy. India adopted centralised planning and implemented five-year plans as its main tool for development. 

In 1950, India set up the Planning Commission to oversee the entire range of planning, including resource allocation, implementation, and appraisal of the five-year plans. The first five-year plan was implemented in 1952, which largely focused on agriculture, the creation of irrigation facilities, the construction of dams, and the laying of infrastructure. From 1951 to 1979, the Indian economy grew at an average rate of about 3.1% per year. But, during the late 1980s, India relied increasingly on borrowing from foreign sources, which led to a balance of payments crisis in 1990. 

To receive new loans, the Government at that point had no choice but to agree to adopt economic liberalisation, and in line with that, India formulated a new economic policy in 1991. Since then, the Indian economy has progressed at the rate of 6-8% per annum. 

The structural benchmarks were in the areas of industrial policy, trade liberalisation, domestic pricing policies, public enterprises reforms, financial sector reforms, tax reforms, and expenditure control. The adopted crisis management measures included utilisation of gold to raise foreign exchange resources, liberalisation in the policy for import of gold, Indian development bonds and non-resident deposits, liberalisation of import licensing, liberalisation of tariffs, industrial deregulation, foreign investment policy and significant steps in the exchange rate policy. In many ways, the IMF program of 1991/92 ensured India’s integration into the global economy. 

India’s major industries include IT, telecom, textiles, chemicals, food processing, steel, transportation equipment, engineering goods, cement, mining, petroleum, machinery, software, and pharmaceuticals. In the last two decades, India has become a leading country in the services sector. 

In 2011, the Government devised the National Manufacturing Policy (NMP) with the aim to enhance the share of manufacturing in India’s GDP to 25% by 2025. 

Sectors of the Indian Economy

There are three main sectors in the Indian economy – primary, secondary, and tertiary or service sector. These sectors cater to different classes of people in the economy, depending upon the nature of activities.

1. Primary Sector

The primary sector, also known as the agricultural sector, is dependent on the availability of natural resources. Activities such as fisheries and forestry also come under this sector. This sector provides the input or raw materials for the secondary sector. 

1. Secondary Sector

The secondary sector, often termed the manufacturing sector, is dependent on the natural ingredients procured from the primary sector to create the goods. They consume the products of primary sectors and create the final product for the end-user consumption. In terms of the value added to the products or services, this sector is considered the most beneficial sector. Activities such as manufacturing and transportation fall under this category and are the backbone of the Indian economy. 

1. Tertiary or Service Sector

This sector also contributes a significant share to the development of GDP in India. The sector is also known as the service sector. The development of this sector is important for the development of the other two sectors. People who are not engaged in the primary or secondary sector, but are supporting the smooth functioning of these two sectors, are said to be working in the tertiary sector. Examples of this sector are postal, IT services, consulting, etc. 

India: Global R&D Hub

In the last 50 years, the Indian Government has put in significant efforts to develop its scientific and technical infrastructure. With the combination of modern infrastructure and a highly qualified workforce, India aims to ensure that they become the next Global R&D hub.

Impact of COVID-19 on the Indian Economy

The entire world has suffered because of the global pandemic and India is also not left out from the impact. The pandemic has been largely disruptive in terms of economic activity as well as the loss of human lives. Almost all the sectors are negatively affected as demand and exports are decreased. In agriculture, the farmers were faced with broken supply chains, a lack of market outlets, poor demand, and falling output prices. In the industrial sector, micro and small enterprises were the most acutely affected. The only sector that noticed a rise during the pandemic was the IT sector. 

Conclusion

The Indian economy is one of the fastest-growing economies in the world. With the rising income and savings, investment opportunities, and younger population, India has ensured rapid growth for decades to come. The main areas or sectors that will support the growth of the Indian economy are IT, telecom, ITES, pharmaceuticals, banking, Insurance, textiles and apparel, steel, machine tools, and gems and jewellery. The coming decades are likely to witness tectonic shifts in the world economic structure, and India’s share in the world output is projected to jump from 5% as of today to 20.8% by 2040.