Today, India is one of the fastest growing economies in the world. In recent times, country has witnessed a tremendous rise in its growth rate. The history of Indian Economy can be broadly classified into four parts listed below.
- Indian Economy before Colonial Period
- Indian Economy during Colonial Period
- Indian Economy before Liberalization
- Indian Economy after Liberalization
Indian Economy before Colonial Period
The earliest known evident civilization which flourished on the Indian soil was the Indus Valley Civilization. Historians believed that this civilization would have flourished between the time frame of 2800 BC and 1800 BC. It is evident from the excavated cities and structures that the inhabitants of the Indus Valley practiced agriculture, domesticated animals and had developed trade relationships between different cities. They are also known to have developed a uniform system of weights and measures. Also, the inhabitants of Indus Valley were one amongst the very first of people to have developed a network of well planned cities with their application of urban planning. These planned cities were equipped with the world’s first urban sanitation systems.
India had been successful to develop international trade since as early as the first century BC. Historical evidences suggest that the Coromandel, the Malabar, the Saurashtra and the Bengal coasts were excessively used for the transportation of goods via sea roots from and towards India. In the ancient times, India conducted international trade mainly with parts of Middle East, Southeast Asia, Europe and Africa. Overland international trade, conducted via Khyber Pass, was also prevalent in ancient India.
Later, in medieval times, the Mughal Empire gave way to a centrally administered uniform revenue policy and political stability in India which in turn lead to the further development of trade and unified the nation. During this era, India was primarily an agrarian self-sufficient economy which primarily depended on the primitive methods of agriculture. After the downfall of the Mughal Empire, the economy of India was primarily governed by the Maratha Empire which then ruled over most parts of India. Later, the Maratha defeat in the third battle of Panipat disintegrated India into several Maratha confederate states which raised a widespread political turmoil in the country. The economy of India turned highly disturbed in most parts of the country during this phase, but some areas gained a local prosperity too. Later, by the end of eighteenth century, the British East India Company was successful in being a part of the Indian political machinery, following which there was a drastic change in the country’s economic activities and the trade conducted from the Indian soil.
Indian Economy during Colonial Period
During the reign of the British East India Company, there was a drastic shift in the economic activities conducted across the country. More stress was laid on commercialization of agriculture. This led to a change in the agricultural pattern across the nation. During this phase of the Indian economy, there was a constant decline in the production of food grains in the country which resulted to the mass impoverishment and destitution of farmers. Also, in a short span after this shift of pattern, there were numerous famines raised in the country.
Though, after and during this phase, there was a sharp decline in the economic structure of the country, but this was also the phase during which some major and economically important developments took place. These developments include the establishment of railways, telegraphs, common law and adversarial legal system. Also, it was during this era that a civil service which essentially aimed to be free from the political interference was established.
Indian Economy before Liberalization
After independence, till 1991, the economic policies of India were primarily inspired by the Soviet economic planning under which a strong emphasis was laid on increasing the domestic self-sufficiency and reducing the reliance on imports. The economic policies of India during this phase were primarily protectionist and marked by excessive economic interventions and business regulations. Also, during this era the major concern of the government was to develop large and heavy public sector industries.
The economic planning process during this phase was mainly conducted centrally through the Five Year Planning process of the Planning commission. This structure of economic planning, through Five Year Plans, was analogous to the planning process of the Soviet Union. Industries like mining, steel, machine tools, insurance, telecommunications and power plants were effectively nationalized during this era.
The Government of India, under the leadership of India’s first Prime Minister, Jawaharlal Nehru, along with statistician Prasanta Chandra Mahalanobis formulated an economic policy which laid a prime focus on the development of heavy industry in country by both the public and the private sector. However, despite all its efforts, the economy of India was unsuccessful to grow at pace with other Asian countries for the first three decades after independence.
Later, in 1965, the advent of Green Revolution in country, triggered by the improved irrigation facilities, increased use of fertilizers and the introduction of high-yielding varieties of seeds improved the economic conditions of the country and enabled a better link between industry and agriculture in India.
Indian Economy after Liberalization
In 1991, as a result of the reforms demanded by the IMF (International Monetary Fund) in return of allotting India a bailout loan of US$ 1.8 billion, the government of India under the leadership of Prime Minister, Narasimha Rao, and Finance Minister, Manmohan Singh, adopted the economic reforms of 1991.
Under these reforms, the tariffs and the interest rates were reduced which in turn ended the public sector monopolies in certain sectors. Also, these reforms approved the foreign direct investment in many sectors. Later, by the end of the twentieth century, the Indian economy had progressed towards a free market economy and was marked with increased financial liberalization. During this phase, the Indian economy has also witnessed a tremendous improvement in the literacy rates, food security and life expectancy.
A Global Investment Bank, Goldman Sachs, recently predicted that by 2035 India would be the third largesteconomy in the world, next only to USA and China. It is expected that the Indian Economy will grow to 60% of size of the USA’s economy. Indian economy has grown at a tremendous rate during this phase and is still growing with high acceleration.