September , 2022
Indian economy climbs to become the fifth largest economy in the world, yet millions go hungry
22:08 pm

Tushar K. Mahanti

Once branded a "third world country", a term used for poor developing countries, India is now among the largest economies of the world. It is the world's fifth largest economy by nominal GDP and the third largest by purchasing power parity (PPP). India has emerged as the fastest-growing major economy in the world, and is expected to be one of the top three economic powers globally over the next decade, backed by its robust democracy and strong partnerships.

India celebrated its 75th year of independence on 15th August, 2022. The journey of its economic evolution over the last 75 years has been marked by significant milestones and reforms that enabled it to achieve substantial progress in many areas including rise in income levels, agriculture, literacy, infrastructure and a wide variety of other economic indicators.


Income growth

India’s journey of economic evolution began with the First Five-Year Plan in 1951 whose main focus was to develop the core industrial sector of the country. The focus changed with time and the concept of a five year plan was discontinued after the Twelfth Plan (2012-17).

There may have been diverse arguments about the success of these plans, but the fact remains that the Indian economy grew and a number of core sector industries, which acted as a growth multiplier, came up in subsequent years. The gross domestic product, the monetary measure of all goods and services produced in a country in a year, rose from Rs 2.79 lakh crore (at constant prices) in 1950-51 to an estimated Rs 147.36 lakh crore in 2021-22. India's economy, currently at $3.17 trillion, is the fifth largest economy in the world in 2022. At the time of Independence, India accounted for only three per cent of the world’s GDP; in 2021, it’s share was 9.5% of world GDP (Source: IMF).

The economic growth in India has steadily accelerated in the last fifty years without any prolonged reversals. The GDP has grown from an average 4.4% annually in the 1970s and 1980s to 5.5% in the 1990s and early 2000s. The economic liberalization of 1991 saw the growth rate not only accelerated but to become stable. The transition of the economy towards a stable service sector has also helped add stability to the economy. It went up further to 7% in the late 2010s. The country aims to become a $5 trillion economy by 2025.

With faster GDP growth, per capita income too has grown steadily. India's per capita net national Income rose from Rs 12,493 in 1950-51 to Rs 91,481 in 2021-22 (provisional estimates). 


Industry diversifies

India’s economic policy after independence was influenced by the colonial experience. The economic growth was expected to thrive through rapid development of heavy industry by both public and private sectors. The Industrial Policy Resolution of 1948 proposed a mixed economy. However, in later years the importance of the private sector grew as the government-run industries failed to face the increasing competition putting pressure on government finances.

The Industrial Policy of 1991 constituted a major economic reform and was introduced to reinvigorate the industrial sector. The policy dismantled the system of industrial licensing and opened the sector for greater private sector participation as well as foreign investment.

Many sectors gained pace in the manufacturing scenario. From just three automobile companies, the automotive sector attracted global multinationals and built up a range of products of global quality standards. In pharmaceuticals, India is now a major producer and undertakes research to develop new drugs. Engineering and electrical machinery goods have evolved to global benchmarks as well.

In services, new sectors such as information technology and telecommunications have transformed the landscape, creating new opportunities such as e-commerce and startups. India’s IT skills are renowned the world over.

Conventional services industries have also expanded, with financial services, tourism and hospitality, and retail changing in multiple ways, adapting to technology and gaining share in the economy. The real gross value added for the services sector comprising trade, hotels, transport and communications increased from around Rs 308 billion during 1950-51 to Rs 23,856 billion during 2011-12 (2004-05 series) and was provisionally estimated at Rs 24 trillion in 2021-22. The gross value added of the financial and real estate sector was estimated at more than Rs 30 trillion in 2021-22.


IT and ITes shine

If India’s traditional industries have prospered after liberalisation and the scrapping of the licence-raj, India has excelled in one of the newest areas, namely, the software technology, once known as ’sunrise industry’. India's IT Services industry was born in Mumbai in 1967 with the establishment of Tata Consultancy Services

The development of the Indian software industry is an archetype of how economic liberalization combined with an entrepreneurial spirit can build an industry that today contributes as much as 9% to the GDP and 51% of all exports of a fast-growing country like India. Thousands of IT services companies have been built over the last three decades, establishing India’s supremacy in the global sphere. According to Statista, a German company specializing in market and consumer data, The Indian IT industry accounted for about a fifth of global IT spending in 2021.

In 2022, the industry added 4.5 lakh new employees, the most in a single year. Today, the industry employs five million people, with over two million of them hired in the previous ten years. By FY26, the information and technology (IT) industry can expect to generate $350 billion in sales, rising at an annual rate of 11-14%. According to Nasscom, the sector’s revenue was $227 billion in FY 2022, witnessing $30 billion incremental revenue over the previous year with an overall growth rate of 15.5%.

The industry recorded nearly 10% estimated growth in direct employee pool in FY2022 with a highest-ever net addition of approximately 4.5 lakh new recruits. With 1 out of 3 employees already digitally skilled, the digital tech talent pool is at 1.6 million, growing at a CAGR of 25%


Building new India

India has also made significant headway in infrastructure and has worked over the years to establish a robust transport network. India has done a remarkable job in constructing a well-connected network of highways and is constantly upgrading the same. There has been a 7-fold rise in highway construction from 1950 to 2022.

The pace of annual construction of four, six and eight lane national highways (NHs) has increased by more than 300% during the past seven years - from merely 1,289 km in 2015-16 to 3,963 km during 2021-22.

Length of national and state highways have also increased substantially while the number of registered vehicles has gone up from 0.31 million during 1950-51 to around 295 million in fiscal 2019.

Civil aviation has also witnessed immense growth, with the number of passengers increasing from only 10.74 million during 14.41 crore in 2019.India is expected to overtake China and the United States as the world's third-largest air passenger market in the next ten years, by 2030, according to the International Air Transport Association (IATA). 

After Independence India inherited a rather dilapidated railway network with nearly 40% of the railway lines being in the newly created Pakistan. Today India has the fourth largest railway system in the world by size, with a total route length of 67,956 km as of 31 March 2022. About 52,247 km or 83% of all the broad-gauge routes are electrified as of 1 April 2022.  It runs 13,169 passenger trains daily, on both long-distance and suburban routes, covering 7,325 stations. In the freight segment, Indian railways run 8,479 trains daily.

And if the modernization and diversification of telecom is comparatively a new phenomenon, India has excelled here. It is the world’s second-largest telecommunications market. The total subscriber base, wireless subscriptions as well as wired broadband subscriptions have grown consistently. Tele-density stood at 85.91%, as of December 2021, total broadband subscriptions grew to 792.1 million until December 2021 and total subscriber base stood at 1.18 billion in December 2021. The total wireless data usage in India grew 16.54% quarterly to reach 32,397 PB in the first quarter of FY22. Over the next five years, rise in mobile-phone penetration and decline in data costs is expected to add 500 million new internet users in India, creating opportunities for new businesses.


Electricity goes to every village

India has successfully turned into a power surplus nation. The sector has grown significantly since independence, both in the installed capacity and transmission and distribution (T&D) system. The total power generating capacity of (utilities & non utilities) has increased from a meagre 1,362 MW in 1947 to about 448.11 GW at the end of March, 2020. The per capita electricity consumption which was a mere 16.3 units in 1947 has increased to 1,208 units in 2019-20. In the last three years, the shortages have reduced substantially and, in fact, at present the country has unutilized generating capacity. And now seven decades after independence, India has achieved electrification of all its villages after electricity reached Leisang village in Manipur on 28th April, 2018.

To note, while at COP 21 India had committed to achieving 40% of its installed electricity capacity from non-fossil energy sources by 2030, it achieved this target in November 2021 itself. The country’s installed renewable energy capacity stood at 150.54 GW as on 30.11.2021 taking renewable energy’s share to 40.1% of the total installed electricity capacity In line with the promises of Modi at the CoP26. India has set a target of  500 GW installed capacity from non-fossil fuel sources by the year 2030.


Literacy rate rises

At the time of independence four out of five Indians could not read or write. It was a major concern for the policy makers and the government took various initiatives to improve literacy rate in the country. There has been a remarkable growth in the literacy rate since then. The jump has been over fourfold since 1951. The literacy rate has leaped from 18.3% in 1951 to 74.4% in 2018, which is a testimony to the relentless efforts of the government in establishing a well-educated nation.

For the purpose of census 2011, a person aged seven and above, who can both read and write with understanding in any language, is treated as literate. A person, who can only read but cannot write, is not literate.

The improvement in literacy rate is reflected in the rise in the gross enrolment ratio (GER). In 2019-20 the GER at all levels of school education has improved compared to 2018-19. According to the UDISE+ report, in 2019-20, enrolment of girls from primary to higher secondary stage was more than 12.08 crore recording a substantial increase by 14.08 lakh compared to 2018-19. GER increased to 89.7% in 2019-20 from 87.7% in 2018-19 at upper primary level, 97.8% from 96.1% at elementary level, 77.9% from 76.9% at secondary level and 51.4% from 50.1% at higher secondary level during the same period.


Agriculture thrives

India may have done well to increase its GDP or to improve infrastructure since independence, but the real transformation has come in flourishing agriculture that provides livelihood to about three-fifths of Indians. The devastating Bengal famine happened just four years before Independence laying bare the pitiable state of Indian agriculture.

And if analysts later claimed that it was largely a man-made famine, the fact remains that the country was suffering from a severe food shortage. Now that India completes 75 years as an independent nation, the occasion calls for many celebrations, one of which is the transformation of agriculture undergone since then. From a food deficit country, India has become a food surplus nation now.

India's foodgrains production rose six times in seven decades from 50.82 million tonnes in 1950-51 to 308.82 million tonnes in 2020-21. As per advanced estimates by the government the total foodgrains production in 2021-22 would be a record 316.06 million tonnes, which is higher by 25.35 million tonnes than the previous five years’ (2016-17 to 2020-21) average production.

India is the world's second largest producer of rice, wheat, sugarcane, groundnut, vegetables, fruit and cotton. India is also a leading producer of spices, fish, poultry, livestock and plantation crops. It is the world's largest producer of milk, pulses and jute.

India has shown a steady average nationwide annual increase in the mass-produced per hectare for some agricultural items, over the last 75 years. These gains have come mainly from India's green revolution of the 1960s, improving road and power generation infrastructure, knowledge of gains and reforms. There was a high investment in crop research, infrastructure, market development, and appropriate policy support. Efforts were made to improve the genetic component of traditional crops. 

That rising productivity, made possible through improving farm infrastructure, mechanisation and uses of high yielding varieties is seen in the big gap between the rate of rise in production and net sown area. While net sown area has increased by 17.4% between 1950-51 and 2016-17 (the latest available data), the foodgrains production has increased by over 507% between 1950-51 and 2020-21.

The per hectare yield of rice has increased over four times from 668 kg in 1950-51 to 2,713 kg in 2020-21 while the per hectare yield of wheat has gone up more than five times from 663 kg to 3,464 kg during the same period.

With the growth in production India has now become a big exporter of agricultural commodities. In 2021-22 the country exported $ 49.6 billion worth of agricultural products – up from $ 41.3 billion in 2020-21 .Rice is the largest exported agricultural product from India and contributed to more than 19% to the total agricultural exports. Wheat exports were valued at $ 2.1 billion last year against $ 568 million in the previous year.



Its celebration time - Azadi Ka Amrit Mahotsav, the government has coined the phrase to commemorate 75 years of independence. India indeed has witnessed a huge rise in national income and in foodgrains production. The literacy rate has increased, industrial output has steadily risen and so also a number of macro indicators.

However the question is: Has this growth succeeded in improving the life of an average Indian? To begin with, look at the success of our food security claim. In the Global Hunger Index India was ranked 101st in 2021 out of a total 116 countries. India was also among the 31 countries where hunger was identified as serious.

According to the State of Food Security and Nutrition in the World 2022 report by UN agencies the number of people affected by hunger globally rose to 828 million in 2021. The number of such people in India was estimated at 224.3 million. That is, India was home to one out of every four undernourished people in the world. India has not counted its poor since 2011, but the United Nations estimated the number of poor in the country to be 364 million in 2019 or about 28% of the population. 

In the Human Development Index, published by the United Nations, India ranked 131st out of 188 countries in the world in 2022, the same as that of the previous year. The HDI is prepared based on key dimensions of human development; the life expectancy, education, and per capita income. India’s 131stt rank clearly testifies that higher GDP growth is no guarantee to better life for an average Indian.


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