INDIA@75: A Journey of India’s Socio-Economic Development

Harshit Mishra           

Piyush Prakash

As India celebrates ‘Azadi Ka Amrit Mahotsav’ to commemorate 75 years of its independence, there is so much to appreciate the way India has transformed itself from an underdeveloped country to a major economic force to reckon in these 75 years. Today, India stands as one of the fastest growing economies while the major economies show a sign of recession amidst the disruptions caused by the Ukrainian war and the Covid-19 pandemic. India has more than doubled its life-expectancy since independence and has emerged as the pharmacy capital of the world. India’s contribution to the global health was at display during the Covid-19 pandemic. Nearly 100 countries benefitted from the Indian vaccines and medicines while at home India has cumulatively carried out over 200 crores vaccinations. Not only this, India has achieved cent percent electrification today covering 6 lakh villages.At the same time India has attained self-sufficiency in food production while meeting the food needs of many countries. From frugal innovations in space technology to CEOs of global technology firms, India has done stupendously well in nurturing a pool of highly talented and sought after global talent.These achievements standout if we look back where we stood at the eve of Independence. The Indian GDP has grown by ~50 times in these years from 2.7 lakh crores in 1947. India was a food deficit country at the time of Independence and was dependent on imports to feed its people. Only 3000 villages were electrified in 1950. The average life expectancy was estimated to be around 31% at the time of independence while the literacy rate was only 18.33% in 1950. These developments bear testimony to India’s resilience amidst extremely challenging socio-economic conditions on the eve of independence. This very resilience of the Indian polity and economy inspires confidence towards achieving the goal of Atmanirbhar Bharatas we leap into the centenary quarter of India’s independence. India@75 is also a moment to step back and reflect on the successes and current challenges in achieving inclusive development. In this article we briefly trace the progress made by India on the economic front, human development front and governance front while understanding the major roadblocks and suggesting way forward.

1.      Economic Growth: 1947 to Present

Indian Economy on the Eve of Independence

“At a time when the West of Europe, the birthplace of modern industrial system, was inhabited by uncivilised tribes, India was famous for the wealth of her rulers and for high artistic skill of her craftsmen. And even at a much later period, when the merchant adventurers from the West made their first appearance in India, the industrial development of this country was, at any rate, not inferior to that of the more advanced European nations.” This observation made by the Industrial Commission Report (1918) sheds light on the superior industrial status of India which was systematically undermined and brought down by the imperialistic policies of the company rule and crown rule in India. Angus Maddison, a British economist estimated that India’s share in global GDP was ~25% around 1700s which declined to ~3% in 1950s. In 1947, the Indian economy was predominantly dominated by the agriculture sector. As per the National Income Committee Report (1954), agriculture and allied sectors contributed nearly half of the national income. Mining, manufacturing and hand trades formed one sixth of the national income. Commerce, transport and communications added approximately one-sixth of the national income. Other services such as professions, administrative services, domestic services etc contributed ~15% of the national income. As we will observe further how this composition changed over the years driven by planned interventions, economic shocks and integration with the global economy.

Era of Mixed Economy & the Five Year Plans (1951-1990)

India started its post-independence economic journey with the Industrial Policy Resolution of 1948 which categorised industries under four heads: Strategic Industries, Basic/Key Industries, Important Industries and Other Industries (Private & Cooperative Sector). The resolution put significant emphasis on public led industries to drive growth. Subsequently, the First Five Year Plan drafted by economist K N Raj was introduced for the period 1951-56 with a major focus on agriculture and energy and a growth target of 2.1%. The plan outperformed and registered a growth of 3.6% . The second Five Year Plan (1956-61), popularly known as the Mahalanobis Plan, brought the focus on rapid industrialization with a growth target of 4.5%. The plan could achieve a target of 4.27% . The plan period also coincided with the Industry Policy Resolution 1956 which aimed to implement the aims of the 1954 Parliamentary resolution of socialistic pattern of society in India. This led to control of major industries by the public sector but with a focus on capital goods and heavy industries resulting in setting up of mega hydropower projects in the country. During the second plan years, the public spending on industries went up from 4.9% to 24.1 5 while the agriculture sector saw a major drop from 37% to 20.9%. The Third Year Plan (1961-66) took a long term perspective of fifteen years with the objective to expand the economy rapidly and become self-reliant and self-generating. However, the set growth target of 5.6 % couldn’t be achieved and the economy by only 2.84% in this period. It is important to note that this period is marked by two wars and the severe drought of 1965. The Third plan period also bore the impact of lowering investment in agriculture in the previous plan. The country came close to a mass famine in 1960. The food imports and aids grew in this period. The Green Revolution started in 1965 which marked the modernization of agriculture with High Yielding Variety (HYV) seeds, mechanized farm tools, high use of fertilisers and expansion of irrigation systems. The fourth plan (1969-74) started after a gap of three years amidst rising inflation, shrinking economy and rising unemployment. The period also saw another war in 1971 and was hit by the international oil crisis of 1973. As a result, a growth of 3.3% was registered against the ambitious target of 5.7%. The fifth plan (1974-1979) continued to be marred by the increasing inflation and unemployment. The four-fold increase in oil prices and increase in prices of cereals, fertilisers, machinery and equipment, non-ferrous metals and other imported goods severely eroded the resources. The value of the three principal items of imports, namely food, fertilisers and POL accounted for as much as 53.2% of the total import bill in 1974-75, as against 42.6% in 1973-74 and 23% in 1972-73 . Yet, the economy achieved a growth of 4.80% -- an increase of 0.40 percentage points from the set target.  At the beginning of the sixth plan (1980-85) growth prospects of the economy had been adversely affected by three factors: inflationary situation, constraints imposed by a poor performance in the basic infrastructure and the deteriorating balance of payments position. India's balance of trade has shown an adverse trend since 1977-78. As against ;a surplus of Rs. 72 crores in 1976-77, the deficit in trade balance was Rs. 621 crores in 1977-78 and is reported to have been more than Rs. 2370 crores in 1979-80. The available data regarding the balance of trade for the first six months of 1980-81 show that the deficit has already exceeded Rs. 3000 crores. And, once gain the economy performed better than the set target. The seventh plan (1985-90) identified low productivity as one of the major weakness Indian economy. It maintained one major cause of low productivity is the inefficiency in the use of capital: the increases in output in several sectors have not been commensurate with the scale of investment undertaken. The focus of the plan, therefore, was on increasing productivity through bringing technological interventions. At the same time the balance of payment problem kept ballooning as India was financing its exports through imports.

The Era of Liberalization (1991 onwards)

India’s external debt nearly doubled from some $35 billion at the end of 1984-85 to $69 billion by the end of 1990-91. Two sources of external shocks contributed the most to India’s large current account deficit in 1990-91. The first shock came from events in the Middle East in 1990 and the consequent run-up in world oil prices, which helped precipitate the crisis in India .Second, the deterioration of the current account was also induced by slow growth in important trading partners. The forex reserves fell to an all-time low – with barely enough to support India’s three weeks of import. Swift measures were taken by the then government first by devaluing the rupee twice in short span of time followed by opening of the Indian economy, more popularly known as the liberalisation, privatisation and globalisation (LPG) reforms. The 1991 reforms remains an important milestone in the growth of Indian economy as we see an inflection point in the growth rates in the following decades.

The GDP per capita grew from $82.2 in 1960 to $303.1 in 1991 in a span of 30 years. In the next thirty years i.e. from 1991 to 2021 the GDP per capita grew by more than seven times to reach $2277.4 in 2021. In between 1991-2000, a series of reforms such as the Liberalised Exchange Rate Management System was introduced, Guidelines for the establishment of private sector banks were brought, National Stock Exchange commenced operations (1994), Foreign Institutional Investors (debt funds) permitted to invest in dated Government Securities (1997), Foreign Exchange Management Act, 1999 replaced FERA, 1973.  The next two decades saw phenomenal growth of the Indian economy accompanied by the rise of India’s IT might, global expansion and acquisitions by Indian private companies, rise in exports and inflow of foreign capital which further fuelled India’s growth. While India made strides in economic growth it also saw major improvements in the human development indicators and quality of life as discussed below.

2.      Strides made under Human Development

Health& Nutrition:

India’s life expectancy at the time of Independence was ~32 years. The infant mortality rate (IMR) stood at 146/100 live births while the maternity mortality rate stood at 1000/100000 live births. There were only 50,000 doctors across the country.  The infant mortality rate further declined to 89 in 1990 to 28 in 2020 nearly par with the global average of 27. Similarly, the MMR reduced to 556 in 1990  and further to 103 in 2017-18 as per the special bulletin released by the Registrar General of India in March 2022.  The number of doctors grew to 393,424 in 1990and to 13,01,319 in 2021.

As per the NFHS first survey in 1992, 53.4 % of the children under age 4 were underweight, and 52% were stunted. In the latest NFHS fifth survey( 2019-21), the underweightand stunted children percentages has come down to 32.1% and 35% respectively.

Education:

At the eve of Independence only 18% of the population was literate which increased to 39% in 1990 and today it stands at ~74%. In 1950-51, ~ 14% of the children had access to upper primary education and 42% had access to primary education . These numbers increased to reach 101.03% for primary GER and 60.11% for upper primary GER in 1990-91 . At per UDISE 2020-21, the primary and upper primary GER stand at 103.28% and 92.17% respectively. The World Bank funded District Primary Education Program (1992) and later the self-funded GOI program Sarva Shiksha Abhiyan (2001) laid the foundation for today’s near universal elementary school enrolment (99.09% GER) in India. The RTE Act 2009 played a major role in ensuring mandatory free education to all children in the age group 6-14 years. While the achievements in school education are commendable, India made significant progress in the higher education as well. At the time of independence India had 578 colleges and 27 university level institutions with an enrolment of 0.40 million. The numbers increased significantly especially 1991 onwards.

At present India boasts of 1000+ universities , over 40,000 colleges enrolling ~40 million students at a GER of 27.1%. In terms of qualitative achievements, India stands at third position in terms of publication of scientific articles right behind US and China. Of the 13,045 patents in 2017-18, as many as 1,937 were by Indians. At the same time Indian Start-up ecosystem has boomed like anything. India houses 100 unicorns with total valuation of INR 25 lakh crores.

Areas of Improvement

India has made significant progress on the economic as well as social indicators. However, the quarter century to the centenary year of Independence is an opportunity to reflect upon the areas which need further improvement. For instance, though India has proactively undertaken reforms to improve child and maternal health, stunting remains a major roadblock in attainment of full potential of a child. At the same time India houses the maximum diabetic patient and other non-communicable diseases across the globe. There is an urgent need to tackle many of these lifestyle diseases head-on.

On the educational front, though we have achieved universal elementary enrolment, the learning outcomes of school students is a serious concern. The National Education Policy 2020 recognises this challenge. Similarly, as per the latest India Skills Report co-published by AICTE, only ~50% of our graduates are employable. India is one of the youngest nation with a median age of 28 years. We need to equip our youth with right skills and education to be able to reap the benefits of the demographic dividend.

The service sector contributes ~54% of India’s total Gross Value Added (GVA), the industry sector contributes ~26% and the agriculture and allied sector contributes ~20% to the GVA. However, the agriculture and allied sector contribute maximum to the employment pool -- ~43% followed by services at ~32% and industry at ~25%. The issue of underemployment and disguised unemployment in the agriculture and allied sector needs to be resolved as the income of the labour force involved in the sector is not encouraging.

India has also made great progress in terms of gender equality. The gender parity in access to education at all levels is either >1 or = 1. However, the inclusion of women in financially rewarding disciplines is skewed. For instance, girls form only ~30% of the total enrolment in technical courses such as engineering and management etc. Similarly, the female labour force participation though has shown improvement in recent years, stands at ~22% in FY 20-21. And, they form only 10.5% of the total parliamentarians in the country.

3.      Conclusion:

If India needs to transition into a developed and high human development country, it needs to accelerate the pace of reform trajectory that it has taken in different fields. Be it the Poshan Abhiyan or Ayushman Bharat or NIPUNBharat or Gender Budgeting or Skills Mission or Maximum Governance and Minimum Government, there is a need to work in a mission mode with clear timelines and rigorous monitoring of progress and course correction in order to achieve the holistic economic and human development goals set under SDG 2030. This could pave the way towards accelerated development in the run up to the 100th year of independence post the 2030 goalpost. The Government of India has come up with several programmes aimed at empowering all the stakeholders—public, private, philanthropic and common citizens so that each can contribute towards building New India. As it’s said it takes a village to raise a child, the making of Atmanirbhar Bharat will be only be possible through Sabka Saath, Sabha Vikas, Sabha Vishwas and Sabka Prayas!

(Harshit Mishra, Deputy Adviser, NITI Aayog. Piyush Prakash, Senior Associate, NITI Aayog) Views expressed are personal.

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