HISTORY OF INDIAN ECONOMY

Isha V Joshi
Aug 6, 2024
3 min read

Updated: Nov 15, 2024

The Indian economy, according to the World Bank, continues to develop at the highest rate in the world. "India's GDP growth is predicted to be 6.7% for the fiscal year 2025," according to the June Global Economic Prospects Report.

SOURCE: IMF

However, how did India get to this juncture? To understand that, let's have an overview of the history of the Indian economy.

The Indus Valley Civilization marked the dawn of Indian history, flourishing from 3000 BC to 1900 BC. This civilization heavily depended on trade, agriculture, and animal husbandry as they were major contributors to the economy. Around 600 BC, the Mahajan padas minted punch-marked silver coins. During this period, intense trade and urban development activities were seen. As stated in the report published by the government of India, "For the next 1500 years, India produced its classical civilizations which generated wealth in huge amounts. Between the 1st and 17th centuries AD, India is estimated to have had the largest economy of the ancient and medieval world, controlling between one third and one fourth of the world's wealth."

In the 18th century, the British Empire started to expand in India, followed by the decline of Maratha influence, weakening India's economy due to severe exploitation during colonial rule. Therefore, India had ailing economic years filled with several issues.

After gaining independence in 1947, India began to grow slowly and steadily. Following his tenure as the inaugural prime minister of our country, Shri Jawaharlal Nehru was a major contributor to the nation's economic growth. He held number of beliefs, including rapid industrialization, infrastructure growth, economic equality, and many more. A fundamental component of his entire development vision was economic modernization. In addition, he recruited the best economist in the world to contribute to the creation of the second five-year plan, which was introduced in 1956.

From 1951 to 1979, the economy grew at an average rate of about 3.1 percent a year in constant prices, or at an annual rate of 1.0 percent per capita. During this period, industry grew at an average rate of 4.5 percent a year, compared with an annual average of 3.0 percent for agriculture.

In 1991, Dr. Manmohan Singh proposed his first budget in which he quoted, "Sir, I do not minimize the difficulties that lie ahead on the long and arduous journey on which we have embarked. But as Victor Hugo once said, 'no power on earth can stop an idea whose time has come.' I suggest to this august House that the emergence of India as a major economic power in the world happens to be one such idea. Let the whole world hear it loud and clear. India is now wide awake. We shall prevail. We shall overcome."

Since then, the economy has progressed immensely, with GDP growing at a rate of 6-8% per annum. This marked a turning point in the history of the Indian economy.

Today, India's economy is among the fastest-growing in the world. According to the 2024 World GDP ranking, India's economy stands at the fifth rank globally. The World Economic Situation and Prospects as of mid-2024 stated, “India’s economy is forecast to expand by 6.9% in 2024, mainly driven by strong public investment and resilient private consumption.” Domestic consumption accounts for around 70% of India's GDP. The U.N. World Economic Situation and Prospects (WESP) 2024 report, launched in January, stated that growth in India was projected to reach 6.2% in 2024, driven by robust domestic demand and strong growth in the manufacturing and services sectors. India GDP growth is higher than that of the world's leading economies, including China, Russia, the United States, and many more. The business sector, agricultural services and technology, account for the majority of a nation's economic output.

SOURCE: STATISTA

India is certainly becoming optimistic as it is the first country in the world to land Chandrayaan-3 on the south pole of the moon, hosting the G20 successfully, and also being home to many unicorn startups. India also laid the foundation of UPI (Unified Payments Interface), an Indian instant payment service developed by the National Payments Corporation of India (NPCI) in 2016.

India still has a significant journey ahead in the vast landscape of economics. But, as stated in the book Thirukkural, “Doing the right things at the right time is the rope which binds the wealth, making it boundless”. The government is actively implementing various measures to propel India towards becoming a global superpower, and with these concerted efforts, the goal is undoubtedly within reach.

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