India's economic rise: 77 years, key milestones, one remarkable journey

India at 78: As India celebrates its 78th year of independence, the nation's economic journey offers a compelling narrative of resilience, ambition, and transformation. From the humble beginnings of a nascent post-colonial state to becoming one of the world’s largest economies, India's economic history is a tapestry woven with moments of crisis, innovation, and bold reforms.

The Dawn of a New Era: The Foundation of Amul

On a cold December day in 1946, a group of marginal milk producers in Anand, Gujarat, took a step that would change the face of India’s dairy industry forever. Exploited by middlemen and local cartels, these farmers, under the guidance of leaders like Sardar Vallabhbhai Patel and Morarji Desai, formed the Kaira District Co-operative Milk Producers Union—what we now know as Amul. This cooperative was more than just a business; it was a movement that empowered millions of farmers and turned India into the world's largest producer of milk and milk products.

The success of Amul was a precursor to the White Revolution, which made India self-sufficient in milk production and revolutionised rural livelihoods. It was an early indication of what collective action, backed by visionary leadership, could achieve in the newly independent nation.

The Socialist Experiment: Building a Mixed Economy

In the years following independence, India's economic policy was heavily influenced by socialist ideals. The scars of colonial exploitation were fresh, and the country’s first Prime Minister, Jawaharlal Nehru, envisioned a self-reliant economy where both the public and private sectors played crucial roles. The Industrial Policy Resolution of 1948 laid the foundation for a mixed economy, which sought to balance rapid industrialization with the needs of a largely agrarian society.

The establishment of the Planning Commission in 1950 was a significant step towards realising this vision. Modeled after the Soviet Union’s central planning system, the Commission was tasked with crafting Five-Year Plans that would guide the nation’s economic and social development. The first plan, launched in 1951, focused on agriculture and irrigation, reflecting the urgent need to boost food production. The second plan, introduced in 1956, shifted the focus to heavy industries, laying the groundwork for India’s industrial future.

Nationalisation: The State Takes Control

The years following independence saw a wave of nationalisation as the government sought to consolidate its control over key industries. The Air Corporations Act of 1953, which led to the nationalisation of nine airlines, was one of the first major steps in this direction. This move not only streamlined India’s aviation sector but also set the tone for future nationalisations.

In 1969, Prime Minister Indira Gandhi took a bold step by nationalising 14 of the country’s largest banks. This decision was aimed at ensuring that the banking sector served the broader economic needs of the nation, particularly in rural areas. The nationalisation of banks was a watershed moment, as it marked a significant shift in the government’s approach to economic management, emphasising the role of the state in driving development.

However, this period was not without its challenges. In 1957, India witnessed its first major financial scandal—the Mundhra scandal. Feroze Gandhi, an MP and the husband of Indira Gandhi, exposed how the Life Insurance Corporation (LIC) had been manipulated into buying fraudulent stocks, leading to the resignation of then Finance Minister T.T. Krishnamachari. The scandal was a stark reminder of the challenges that came with managing a rapidly expanding public sector.

Crisis and Renewal: The Green and White Revolutions

The 1960s were a tumultuous decade for India. The economy was battered by wars with China and Pakistan, severe food shortages, and a spike in inflation. The deaths of Nehru and his successor, Lal Bahadur Shastri, in quick succession added to the sense of uncertainty. The country was on the brink of a mass famine, and its dependence on food aid from the United States was beginning to strain its foreign policy autonomy.

In this context, Shastri’s focus on agriculture proved to be a turning point. The Green Revolution, driven by geneticist M.S. Swaminathan, introduced high-yield wheat varieties that dramatically increased food production. This was followed by the White Revolution, which expanded the work of Amul and turned India into the largest milk producer in the world. These revolutions not only averted a potential famine but also laid the foundation for India’s future food security.

The 1991 Reforms: A New Economic Paradigm

By the early 1990s, India was facing a severe balance-of-payments crisis. The collapse of the Soviet Union, India’s main trading partner, and the Gulf War, which caused a spike in oil prices, had pushed the economy to the brink of default. The situation was so dire that India had to airlift its gold reserves to secure a bailout from the International Monetary Fund (IMF).

This crisis prompted a radical shift in economic policy. Under the leadership of Prime Minister P.V. Narasimha Rao and Finance Minister Manmohan Singh, India launched a series of economic reforms in 1991 that liberalised the economy. The Licence Raj—a system of licenses, permits, and quotas that stifled business activity—was dismantled, and the economy was opened up to foreign investment. These reforms marked the beginning of India’s integration into the global economy and set the stage for the rapid growth that followed.

The 2008 Global Financial Crisis and Aftermath

The global financial crisis of 2008 was another major challenge for the Indian economy. Although the country was relatively insulated from the immediate effects of the crisis, the government announced three stimulus packages totaling Rs 1.86 lakh crore to support the economy. These measures, along with monetary easing by the Reserve Bank of India (RBI), helped India weather the storm, but they also left a lasting impact on the fiscal deficit, which remains a challenge to this day.

GST and Demonetisation: The Bold Reforms of the 21st Century

In recent years, two major economic events have dominated the headlines: Demonetisation and the introduction of the Goods and Services Tax (GST). In November 2016, Prime Minister Narendra Modi made the unprecedented decision to demonetize Rs 500 and Rs 1,000 notes, rendering 86% of the currency in circulation invalid overnight. The move was aimed at curbing black money and promoting digital transactions, but it also caused significant disruption to the economy in the short term.

The following year, in July 2017, the government introduced GST, a unified tax system that replaced a complex web of state and central taxes. GST was one of the most significant tax reforms in India’s history, aimed at creating a single market and improving the ease of doing business. While the rollout of GST had its share of challenges, it has since become a cornerstone of India’s economic policy.

Looking Ahead: The Road to a $5 Trillion Economy

As India celebrates 77 years of independence, it stands at a crossroads. The country has made significant strides, but challenges remain. The government has set an ambitious target of making India a $5 trillion economy by 2025. Achieving this goal will require continued reforms, investments in infrastructure, and a focus on human capital development.

India’s economic journey over the past 77 years is a testament to the resilience and determination of its people. From the early struggles of a post-colonial state to the challenges of liberalisation and globalisation, India has navigated its path with a unique blend of pragmatism and idealism. As the nation looks to the future, it does so with the confidence that it has the capacity to overcome any challenge and continue its rise on the global stage.

Source: Republicbiz