Seventy-five years ago, in 1947, when India be- came independent, it had a GDP or total income of Rs 2.7 lakh crore and a population of 340 million. Today, in 2022, its GDP stands at Rs 236.65 lakh crore, and the population at over 1.3 billion. While the GDP has gone up by 88 times, the headcount has gone up by just four times. So, obviously Indians, on the whole, are much better off, even after allowing for inflation. But the point is, how is this income distributed? If it is skewed, as is the case with a small sliver at the top enjoying an inordinately large share of the country’s total income, then that does not speak positively about the level of well-being of a good number of Indians.
Recent figures (2021) indicate that the top 10 percent earn 57 percent of the national income whereas a good half of all Indians, the bottom 50 percent, earn only 13 percent of the national income. Thus, looking back over the last 75 years, India has come a long way the size of the cake is many times larger but there is still a long way to go before we can say that all Indians earn a lev- el of income that allows them to live with dignity. In terms of economic policy, two major breaks stand out since 1947. First, till the 1960s, India suffered periodic bouts of food scarcity when a truant monsoon or an excessive flood played havoc with the food output. It is from the 1970s, when India began to enjoy the fruits of the Green Revolution, that there was enough food for all. The Green Revolution was made possible by miracle seeds brought from outside which were adapted by Indian scientists to suit local conditions.
It marked the end of the “ship-to-mouth” existence, whereby the vessels carrying grains from the US under the Public Law 480 (PL-480) program kept Indians away from hunger. Today, India is a major exporter of food and with enough buffer stocks to tide over output loss from bad weather (heatwave), as happened earlier this year.
The other major break came in the early 1990s after a huge foreign exchange crisis. This was the result of the pursuit of economic policies in post-independent India that sought to simultaneously promote Gandhi’s idea of Gram Swaraj, cottage and small-scale industries, and public sector-led large-scale industrialization under planning in imitation of the Soviets which was supported by Nehru.
The payments crisis led to the introduction of new economic policies which said goodbye to industrial licensing and foreign trade controls, resulting in significant growth in manufacturing output and exports. Today, in terms of purchasing power parity, the Indian economy is the third largest in the world. In terms of US dollars, the Indian economy is the sixth largest in the world, after the US, China, Japan, Ger- many and the UK.
In order to get an idea of how far the Indian economy has progressed, it is useful to compare it with China. India and China are now strategic adversaries. They have similar populations and started their independent journey around the same time the late 1940s. While India was able to ward off starvation with the US wheat, China met with a severe setback and agricultural disruption as a result of the “Great Leap Forward” which cost 30 million lives due to starvation. China’s economic reforms started in the late 1970s after the death of Mao Zedong with the ‘four modernizations’ (in agriculture, industry, defense and science, and technology) that hugely improved agricultural output and incomes and created a large demand for manufactured products.
What is the economic scenario and challenges that lie ahead as India celebrates the diamond jubilee of its independence? Even if we assume that the Covid pandemic and Ukraine war are behind the country without having caused major economic damage, one key challenge will remain: how to get the better of China? The depth and complexity of China’s industrial setup is without parallel and even the US has just approved major funding to end dependence on Chinese manufactured components. An inadequate supply of semiconductor chips from China has slowed down car output in many countries, including India. To overcome this, India has launched a major initiative named “production-linked incentive” under which global and Indian firms are being paid large subventions to set put in a few years.
