India is a new emerging economic power in the world. Though the 21st first decade saw a global level financial crisis, India didn’t wilt under its pressure due to it’s the Government’s progressive policies and full-fledged reforms. Particularly, nationalization and liberalisation were the real saviors of India from the recession. Also, the national sectors and global raid helped to maintain the economy in proper way. Introduction
India is an exponentially growing economic powering the world. Indian economy stands today as one of the influential and attractive economy. The liberalization move by the Government of India in 1990s has given a boost to the Indian economy and put her into a fast track economic growth route. In 2009, Indian GDP based on purchasing power parity stood at 3.5 trillion dollar making it India the fourth largest economy. Its service industry accounts for 62.5% of the GDP while the industrial and agricultural sectors contribute 20% and 17.5% respectively.
Its average GDP growth from 2004 to 2010 was 8.40% reaching an historical high of 10.10% in 2006. The GDP expanded 8.9% in the third quarter of 2010. To put to the stock, India had social domestic policies from 1947 to 1991. Apparently, the economy was characterized by extensive regulation, public ownership, pervasive corruption and slow growth. Since 1991, continuing economic liberalisation has moved the country toward a market based economy. A revival of economic reforms and better economic policy in first decade of the 21st century accelerated India’s economic growth rate.
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India unaffected of global recession 2010 saw the ghost of great economic recession worldwide. Through collective action the western economies were able to avert a catastrophe. But the economic growth took a severe blow. Amidst such shake up, Indian economy showed resilience. Though the growth declined from 9% earlier to 6.7% last year, India’s performance was remarkable given the economic backdrop. Due to the bleak financial scenario, the stock market took a hit, and so did many brokers. However, most other sectors have managed to hang on until the worst was over. When the major economies like the US and China are affected, India is not immune to the gigantic recession. The primary reason behind the immunity of Indian economy is that India is a domestic demand driven economy, unlike China, which is an export-oriented economy. And the other reason is its demographics. India is much younger nation to its western counterparts.
Nationalisation is the act of taking assets into state ownership. Nationalisation made the stability of Indian economy. It is a prodigious step of the then Prime Minister Indira Gandhi. Despite the provisions and regulations of RBI, banks in India except SBI were under private ownership. By 1960, Indian banking was a tool to facilitate Indian economy. Thus the Indian Government nationalized 14 largest commercial banks with effect on July 16, 1969 and 6 more India 1980. Consequently, the nationalized banks grew at 4%, closer to the average growth rate of Indian economy.
Liberalisation and Rao’ reforms
Economic liberalisation of India means the process of opening up of Indian economy to trade and investment with rest of the world. Till 1991 India had an import protection policy wherein the trade with outside was limited to exports. Also India started getting huge capital inflows. India response, PM Narsimha Rao along with his Finance Minister Dr. Manmohan Singh, initiated the economic liberalisation of 1991. Rao’s reforms did away with the License Raj and ended many public monopolies, allowing automatic approval of Foreign Direct Investment in many sectors. The next stage of Indian banking has been set up with the proposed relaxation in the norms of FDI, where all India investors India banks may be given voting rights.
Since liberalization, India’s contributions to total global trade have increased to 5%. China, UK, US, Russia, Japan and EU are the major trading partners to India. Both imports and exports have taken a leap of 20% on an average. In July 1991 with the announcement of sweeping liberalization dismantled import controls, lowered customs duties, and devalued the currency… virtually abolished licensing controls on private investment, dropped tax rates, and broke public sector monopolies. Yet the aggregate growth data tells us that the acceleration of economic growth began earlier, in the early or mid-1980s, long before the exchange crisis of 1991 and the shift of the government of Narasimha Rao and Manmohan Singh toward neoliberal economic reforms. To the extent that we trust aggregate national-level income accounts, it is clear that by 1985 Indian aggregate economic growth had undergone a structural break.
Roles of Sectors Indian Sector analysis
Industry and service
Economic reforms brought foreign competition, led to privatization of certain public sector industries, opened up sectors hitherto reserved for the public sector and led to the expansion India the production of burgeoning consumer goods. The share of India’s IT industry to the country’s GDP increased from 4.8% India 2005-06 to 7% in 2008.in 2009 7 Indian firms were listed among the top 15 technology outsourcing companies India the world. Mining also is a major segment of Indian economy as it producing 79 different minerals India 2009-10.
As for worldwide farm output, India ranks second. Agriculture and allied sectors accounted for 15.7% of the GDP India 2009-10, employed 52.1% of the total workforce. Yields per unit area of all crops have grown since 1950, due to the special emphasis placed on agriculture India the 5 year plans and steady improvements in irrigation, technology, application of modern agricultural practices and provision of agricultural credit and subsidies since the Green Revolution in India. However, international comparisons reveal the average yield in India is generally 30% to 50% to the highest average yield in the world.
Banking and finance
The Indian money market is classified into organized and unorganized sectors. The unorganized sector and micro credit are still preferred over traditional banks in rural and sub-urban areas, especially for non –productive purposes. The nationalisation of banks made it mandatory to provide 40% of their net credit to priority sectors like agriculture, retail trade, etc. To ensure that banks fulfill their social goal. India’s gross domestic saving in 2006-07 was high at 32.7. The public sector banks hold over 75% of total assets of banking industry, with the private and foreign banks holding 18.2% and 6.5% respectively.
External trade and investments
Trade and external sector
The trade and external sector of the country reached US$ 279.1 billion as on the end of March 2010. As on the November 2010, the resources stood at US$ 293, 979 million, as per RBI’s Statiscal supplement. The ‘OECD Investment policy Reviews: India 2009’ report hails India as the both major destination for the foreign direct investment (FDI). The reports add that India has become a major global player with high economic rates and its program in the past years has been particularly impressive in view of the global collapse in FDI flows.
Further, as per the world investment report 2009, India has been named as one of the top 5 most attractive location of FDI for 2009-11. Despite a surge in foreign investments, rigid FDI policies resulted in a significant hindrance. However, due to some positive economic reforms aimed at deregulating the economy and stimulating foreign investments, India has positioned itself as one of the frontrunners of the rapidly growing Asia –pacific region during 2009-2010 the country attracted $178 billion of the FDI while the amount FDI inflow into India during the Fiscal Year 2010-11 stood at US$ 2 billion, according to Department of Industrial Policy and Promotion (DIPP). Service sector attracted the maximum FDI during April September with US$ 2 billion. The country received maximum FDI from countries like Mauritius Singapore and us with US$ 3.8 billion and US$ 724 million respectively, during April September 2010
Conclusion Global economy is seems to be expanding after a recent shock. Indian Economy, however just felt the blow of the global economic recession and the real economic growth have seen a sharp fall followed by the lower exports, capital outflow and corporate restructuring. It is expected that the global economies continue to stay strong in the short-term as the effect of stimulus is still strong and the tax cuts are working. Due to strong position of liquidity in the market, large corporations now have access to capital in corporate credit markets. Since 1991, after liberalisation Indian economy has grown tremendously. It was only in late 2000 due to global economic meltdown that the Indian economy growth saw a decline. But, the present scenario by proper implementation of Government policies, the economy of India is on the recovering trend and is exploring new horizons in various sectors.
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India Super Growing Economic Power. (2018, May 12). Retrieved from https://phdessay.com/india-super-growing-economic-power/