Indian Economy at 75: Transformation and Challenges

What the paper says

In this chapter, I will discuss the economic changes that have shaped the Indian economy over the past seventy-five years since independence. Despite impressive growth rates, India’s economic progress has struggled to address persistent issues such as unemployment and the transition of labour from low-productivity sectors, like agriculture, to higher-value sectors, such as manufacturing. Additionally, the recent surge in economic growth has been accompanied by increasing income inequality. Nevertheless, over the past seventy-five years, India has made remarkable strides, especially when compared to its colonial past. One of the nation’s most significant achievements is its robust parliamentary democracy. The adoption of a republican constitution in 1950 provided a platform for people’s participation in governance, reflecting the aspirations of the Indian populace that had fought for national independence. At independence, India faced two major challenges: first, to expand the manufacturing sector to reduce imports and create job opportunities; second, to break the land monopoly and reduce rural inequalities through land reforms. These reforms aimed to increase agricultural output to address food shortages, prevent famines, and support rapid industrialization by fostering a growing domestic market. From 1950 to 1991, India followed a strategy of dirigisme, focusing on building basic industries under public sector control, while protecting domestic industries through licensing and limiting foreign competition. However, by the 1980s, a severe balance of payments crisis forced the government to take a different course. In 1991, pro-market reforms were implemented to restore macroeconomic stability. These neoliberal reforms included the privatization of public companies and greater support for private entrepreneurs through the removal of tariffs on manufactured goods. Today, India faces new and growing challenges, such as rising unemployment, particularly among the youth. The Human Development Report 2021-22 highlights India’s decline in global rankings, dropping from 130 in 2020 to 132 in 2021 (UNDP, 2022). As India marks its 75th year of independence, the future of its democracy appears increasingly at risk. Since becoming Prime Minister in 2014, Mr. Narendra Modi has continued pursuing neoliberal reforms, but his politics of division and hatred could severely disrupt long-term economic growth.