Indian economy is the fastest growing economy at 5th number and third highest economy by purchasing power as India is the most populated country then it is easy to sell the products and services to the people of India.
India has mixed economy system.
Mixed economy system
Mixed economy is that economy system where capitalistic and socialistic economy system both is followed.
In India some control is under the hands of the government and some control is in hands of private players.
The aim of mixed economy system is public welfare and profit earning.
History of Indian economy
The history of Indian economy is from the Indus valley civilization in the 3300-1300 BCE where it shows that it is to be dependent on the trade and overseas trade.
The metal coins are used as exchange e.g. gold , silverberries and barter system was also there as a medium of exchange.
According to the historical evidences Indian economy was the largest economy of world of three millennia, which has started 1st millennia BCE and abolished with the British rule over India.
The history of Indian economy can be divided into 2 categories which can be named as:-
1. Indian economy before independence
2. Indian economy after independence
Various kings and various centuries play a great role in the development of Indian economy as such under:-
Indian economy before independence
- In between the period of 1 CE and 1000 CE, the Indian are 1/3 of the population of world and largest consumption of goods. As per the various resources India was the largest and strongest economy between the periods of 1st and 18th century. But its GDP and per capita income was not satisfactory.
- The Mahajan Padas in 600 century BCE mined punch marked silver coins. This period was the golden period of development of urbanisation and trade activity.
- The maurya empire in 300 BCE focused on military, security and political system well being for a common economic system to boost up trade ,commerce and production from agriculture.
- India has experienced the higher Gross domestic product after 1000 BC into Delhi and Vijayawada empire in the south but not much productive as compare to china.
- In 13th century during mugal empire India become 1/4th of the world economy and manufacturing power.
- India was also a leader manufacturer in world economy till 18th century under British Empire with 1/4th of the production of the world.
- in the empire of Bengal subah India has imported 40% of Dutch goods which was leader in agriculture, textile, shipbuilding and manufacturing .It results into boost up the industrialisation in the India.
- In the 18th century Kingdom of Mysore has introduced an “economic development program” as a major economic power with the high real wages and higher living standard.
- after the kingdom of Mysore the Maratha Empire also manage the Indian economy in well manner effective management of tax collection policy by which they control the core areas under the control.
- India has faced abolished of various industries under the British Empire and the Indian economy has decreased its share in world economy up to 4% approximately.
Indian economy after independence
The Republic of India was founded in 15 August, 1947 where India has divided into two parts India and Pakistan.
The situation of Indian economy was such as following:-
after independence India has declined its share in world economy as British rule harm its growth and took over its various resources.
The India used extensively public ownership, regulations, red tape and trade barriers etc.
- After the crisis of 1991, central government under the supervision of Prime minister Dr. Manmohan Singh launched the policy named LPG which means librasation, privatisation and Globalisation which was helpful to boost up the growth of Indian economy.
- There also various other policies are launched by Indian government with in time to step towards development of India such as “make in India” by prime minister of India Narinder Modi.
- Socialistic Boom :- (1950-1970)
- capitalistic Boom:-(1990-2010)
- economic bust:-(2010- present)
Characteristics / features of Indian economy
The Indian economy is characterized as the fastest developing economy.
It is counted as 5th largest economy by nominal GDP and third largest by purchasing power as India has lot of people then it is easy to sell good here.
- Mixed economy
- Lower per capita income
- More purchasing power due to population practice
- Regular improvement in rate of capital formation
- Unequal asset or wealth distribution
- Cheap human capital quality
- Less developed technology
- Lower level of living standard of Indians
- Demographic characteristics of an underdeveloped country
- Sectorial employment in India
- Foreign capital investment
- Foreign trade
- Low rate of savings
- Agriculture and primary production dependent economy
- Income based disparities
- Lack of infrastructure development
- Imperfections of market
- Traditional society
- Circle of poverty
- Unemployment and underemployed
- Presence of rich resources
- Urban and rural economy
- Unbalanced economic development
- Poor economic organisation
How Indian economy works
The economy of India is work through the production of various resources and their exports like steel, coal etc.
It also imports some essential goods like oil. India launched various schemes on time for welfare of its economy.
India has its ten largest trading partners which are USA, China, Saudi Arabia, Hong Kong, Iraq, Singapore, Germany, south corea and Switzerland.
- The retail marketing of India is $672 billon which is fastest growing sector of India and contributes 10% to Indian GDP.
- India is ranked 2nd for the production of agricultural products .it is exported $38.5 billon agricultural products to foreign countries.
- India is second largest Steel, cement and coal manufacture of the world.
- after agriculture construction and real state is largest contribute towards income of India.
- India is 2nd largest consumer of mobile phones, internet and 10th largest producer of mobile phones.
- The oil consumption of India is 3rd largest in the world.
- The third largest electricity producer is India.
- Automobile sector is 4th largest of world by production.
- The textile industry contributes 2% of Indian GDP with large no. Of employment and 7% of industrial output with the return of $150billon.
- with providing employment to large nom of people IT industry earns$180 billon in Indian economy.
- E-commerce market of India is also fast growing market.
Sectors of Indian economy
Core sectors of Indian economy
According to the data of February 2020
- 40.27% of index of industrial production
- growth 5.5%
The 8 core sectors of Indian economy are:-
- growth rate-10.3%
- Crude oil
- growth rate- -6.4%
- Natural gas
- growth rate- -9.6%
- Petroleum and Refinery products
- weight -28.04%
- growth rate- 7.4%
- growth rate- -0.4%
- growth rate-8.6%
- growth rate-11%
- growth rate-2.9%
Other sectors of Indian economy
- Primary sector ( agriculture and allied sector)17.32%
- Secondary sector( industrial sector)29.02%
- Tertiary sector(services sector)53.66%
- Quartinary activities (IT, communication ,R&D based services)
- Quinary activities (decision makers)
Indian economy in last 5 years
In the last 5 years the journey of Indian economy is such as follows:-
- 5th largest growing trillion economy.
- PPP-$11.33 trillion.
- annual growth rate-6.6%
- 7th largest growing economy.
- GDP-$2.7 trillion
- annual growth rate-2.9%
- Introduction of GST.
- Stock markets improve performance and increase 30%
- GDP-$2.65 trillion
- annual growth rate-7.2%
- GDP-$2.29 trillion
- annual growth rate-7.11%
- GDP-$2.1 trillion
- annual growth rate-8.01%
Indian economy current situation
- According to the data of IMF on per capita income basis India ranked 139th by GDP and 118th by GDP in 2020.
- Ease of doing business rank is 63rd in 2020.
- Net international investment position of India is $436.4 billon.
- in 2020 Indian nominal Gross domestic product was 3.2 trillion USD dollar and Indian ppp gross domestic product was 1.3 trillion US dollar .GDP growth rate was 4.2% in 2019-2020 and estimated to be -3.2 % in 2030-2021. Gross national income was $2338 nominal and $9027 ppp as per latest data.
Slowdown in Indian economy
India has a large number of population.
It is growing country, There is a lot of unemployment , poverty and less income of people.
The Indian government also failed to promote new industries that the youth can be self dependent .
The production from agriculture are also not properly utilised, people are not getting the income which they deserve.
The foreign exchange of India is also very low. India imports more then its exports. Indian consumers are spend on foreign products rather then home manufacturing goods.
Recent slowdown of Indian economy
The GDP of India has gone six year low in the first quarter of 2020, the major reason of the slowdown is covid 19 pandemic whereas government is incapable to make the work and circulation of money in the economy.
The key sectors which suffer the lower GDP growth are agriculture, FMCG products, automobile sector, real estate, manufacturing sector, transportation etc.
In 2020 IMF (International Monetary Fund) declared the Indian economy growth only 1.9% in first quarter of 2020.
The large part of Indian currency is spend on purchasing different types of weapons from other countries due to the disturbance with China.
Reasons of slowdown of Indian economy
There are various reasons of slowdown of Indian economy:-
- Covid 19 pandemic
- Unemployment increase
- No revenue of government
- Various spending on public welfare with respect to covid 19
- No demand
- Less investment
- Less demand of Indian goods as compare to foreign products
- Less growth opportunities for Indian manufacturers
- Lockdown abolish the circulation of money
- Lower exchange rate
- Lower lending rate
- Banking frauds and poor situation of banking system
The National Statistics office (NSO) published in its report that weaker consumer demand and less investment in private sectors are the major causes of the slowdown of Indian economy.
The other cause of the slowdown of Indian economy are that the government has provide various tax and financial relief to its citizens due to corona virus thus government has no income and the spending’s of government has increased as to test covid 19 , provide treatment to patients , various schemes for survival of poor people and manufacturing units of India
- 8 core sectors of Indian economy has shows the negative growth of 2.1% in July as comparison with 7.3% in June 2020.
- No doubt Indian economy has been passing through the period of growth since 2016 as the government introduce GST and demonetisation for the improvement of Indian economy.
Impact on demonetisation on Indian economy
On November 8, 2016 the prime minister of India Mr. Narinder Modi has suddenly announced the demonetisation in the country.
This is done to abolish the corruption in the country.
The prime minister of India has banned the Rs. 500 and Rs. 1000 notes of Indian economy and provide the new currency note of rs.2000.
This move was criticised by the various economist and it effected the Indian economy at a large level.
- It slows down the Indian economy and promote more digital payments in the country.
- With the demonetisation the highest increase in tax payers was recorded that was 9.1 million tax payers are increased. There is 80% rise by the years.
- The GDP of India was moved to 5.7% in April-June. But the World Bank forecast reduce the Indian GDP 7% in 2017-2018 because of the demonetisation in India.
- Various industry workers were unemployment and their growth rate went to 1% in MSME.
Role of agriculture in Indian economy
In India most of the people are dependent on agriculture and agriculture is the main occupation of the India.
The agriculture contribute as following in Indian economy:-
- 17% of the total GDP
- 2.27% of world agriculture
- Food grain production 295.67 million ton (2019-2020) and 298 million ton (2020-2021)
- Between 2000- 2020 attract foreign direct investment of $9.98 billon
- Agriculture contribute 70% of the exports of the country.
- Agriculture fulfil 60% needs of the household consumption.
- Provide employment to 60% of Indian population.
- Primary source for the survival of 58% of Indian population.
- 50% of the income of production sector is dependent on the agricultural based raw- materials.
Impact of GST on Indian economy
Goods and services tax was implemented by the finance minister Arun Jetli with the guidance of the prime minister of India Mr. Narinder Modi on 1 July, 2017.
The motive of the implementation of GST is ,”one Nation ,one Tax” .this was the single tax policy by removing the various indirect tax structure like VAT, excise duty, CST, services tax ,CAD,SAD etc.
The impact of GST on Indian economy is such as following:-
- The competitions in foreign market are increased with cost effectiveness due to the removal of custom duty on export, thus the price of Indian products reduced in foreign market.
- GST added the more revenue to the government by providing a extending tax base system.
- The GST tax structure is more transparent as the tax payers are easily get to know that how much tax they have paid on which basis as the tax calculation is easy and there is no confusion of calculation of various taxes.
- GST provides the credit to the tax payers by the production and supply chain credit structure.
- Different tax barriers have removed due to abolishment of various taxes.
- State and Central government are generate revenue under one tax system.
GST converted India by 1.3 billon $ citizen. By removing of various taxes, reduction of costs, trade barriers, common tax for state and Central government GST achieving the target of $ 2.4 trillion economy.
It is reduced up to 30 % of production cost and increase in exports.
Size of Indian economy
- Population:- 1380004385(as per 2020)
- Nominal GDP -$3.2 trillion
- PPP (purchasing power parity)-$11.33 trillion
- GDP Growth-4.2%(2019-2020) &-3.2% (2020-2021)
- Per capita income-$23.28
- Human development index -medium
- Unemployment rate-5.4%
- Exports-$16.77 billion
- Imports-$12 billion
- FDI in India-$49 billion (6% increase)
- Investment in foreign-$50 billions
- Public debt-Rs. 13 trillion
- Budget balance-fiscal deficit 3.8%
- Revenue-Rs. 21.6 trillion
- Expenses-Rs.30 crore
- Balance of payments-surplus $0.6 billion
- Foreign reserve-$540billion
Globalisation and the Indian economy
In the crisis of 1991, the prime minister of India Dr. Manmohan Singh has introduced LPG policy ,where globalisation is introduced in India Economy.
Globalisation:-Globalisation means allow the foreign companies to invest in the country and promote import and export.
Impact of globalization on Indian economy
- 18-19 %devaluation of Indian economy
- High level of foreign direct investment
- New economic policy
- Foreign firms compete domestic manufacturers
- Increase in employment
- High standard of living
- More circulation of money in economy
- Rise in production
- Growth in exports 20%(1993-1994) and 18.4%(1994-1995)
- Reduction in GDP 13% (1991-1992),annual average rate of GDP 6.1%
Impact of Small scale industries on India economy
The industries which are dependent on size of capital and scale of production, called small scale industries.
The small scale industries which
- Production :-Plant range 25 lakh- 5 crore
- Service provider:- investment 10 lakh-1 crore
Role of small scale industries in Indian economic growth is such as under:-
- 95% industries are small scale industries in India
- Small scale industries have contribute 65% -75% of innovation in India
- Contribute 40% of India’s gross industrial value
- For investment of 10 lakh, output is of 40 lakh
- Direct Export contribution 35%
- Indirect export contribution 15%
- Provide employment
- Urban and rural development
- Utilisation of regional resources
Impact of start up India on Indian economy
In India there is lot of unemployment, people want jobs that can help them for better survival and rise above the poverty line .
This can only be happen when the new industries set up that people can easily get jobs at good salary. Impact of start-up India on Indian economy is such as follows:-
- India needs 10 million jobs per year then start up India can provide jobs to people.
- Start-up business with new ideas bring new Innovation and latest technology in India.
- It help to move the people towards the usage of internet and technology such as uber ,zomato ,paytm etc.
- It also help to build a better standard of living for Indian people such as zomato,swiggy, paytm, coolbenz, uber, oyo, ola, byju, topper etc.
- It boosts circulation of money in economy.
- The Indian firms compete foreign company and help that Indian currency remain in India for the welfare of Indian economy.
Future of Indian economy
It is estimated that Indian economy will be fast growing and high growth economy in upcoming years.
According to the data of various organizations the India will take the place of china in the matter of population by 2035.
It means the largest market which will make the Indian economy largest as the purchasing of goods and services by people will be more as after china and United States measured by market exchange rates.
India’s five major cities will be economics of comparable size of today’s middle income countries.
India is the youngest nation among the world by having 70% of the youth population in India. By 2025, the working population of India will be 20% of the world’s working population.
If we talk about the internet user then 850 million users by 2030.
The loss of china due to the covid 19 can be the biggest opportunity for India to develop its business around the world.
There are various countries which are breaking the trading contract with china so India can make the export of goods to the countries by fulfilling their needs and set up the producing units in the country.
According to the world bank to achieve substantial development India must focus on public sector reform, infrastructure, agriculture and rural development, removal of land and labour regulations, financial inclusion, private investments and exports, health and education .
Indian economy is considered as the fastest growing economy at 5th number in the world .
In the covid 19 pandemic the Indian economy going down up to some extent as government has no revenue and the government is making expenditure on the health care facilities and survival schemes of the population of India.
The Indian economy can be improved by more boost up to start-up industries, small scale industries, exports, utilisation of regional resources, improvement in the government policies and Indian economy.
The government should take the all steps carefully that it can fulfill the target of GDP $5 trillion economy by 2024-2025.