The economy of India as per the GDP is the eleventh largest economy in the world and by purchasing power parity the fourth largest. Following strong economic reforms from the socialist inspired economy of Indian nation before the time of independence, the country began to develop a fast-paced economic growth, as free market principles were initiated in 1990 for international competition and foreign investment. India is an emerging economic power with a very large amount resources both natural and human resource and a growing large pool of skilled professionals. Economists predict that by 2020, India will be among the leading economies of the world. Pre independence era the average annual growth rate of Gross Domestic Product which is commonly known as G.D.P. was around 0.9% and real per capita income was 11% within the geographical boundaries of the present day India. The annual average growth rates of N.N.P at factor cost and per capita NNP at constant prices were as follows up to 1990 Growth Rates
PeriodPer capita NNP growth ratePer capita NNP growth rate Growth Rate of NNP First plan period (I951-56)1.83.6
Second Plan period (1956-61)2.04.1
Third Plan Period (1961-66)0.22.5
Annual Plan (1966-69)1.53.8
Fourth Plan (1969-74)1.03.3
Fifth Plan (1974-79)2.75.0
Annual Plan (1979-80)-8.3-6.0
Sixth Plan (1980-85)3.15.3
Seventh Plan (1985-90)3.75.9
From the foregoing data it is clear that while the average annual growth rate between the first plan and the fourth plan was between 3%, to 4% growth during the 80's was at an annual average rate of 5.9%. This was higher than the world output growth rate of 3.3% and that of developing countries at 4.3% during the same period.The average population growth rate of 2.0% in spite of annual growth rate in per capita GDP in the Nineteen Eighties was over 3.5%. However the aim of doubling the per capita income in the country in 25 years of planning - i.e. by 1975 could be achieved only by the end of 1980's. Further the percentage of population that could not get an average intake of 2100 calories in urban areas 2400 calories per day in rural areas and 2400 calories per day in rural areas remained at 38.9% even in 1987-88. Thus if we examine the impact of 40 years of planning from 1950 to 1990, we find that the economy was at its best in 1980's. The high fiscal deficit also was reflected in the emergence of current account deficit in the external sector, which was around 3.2% of the GDP in 1991. Further external debt of short duration on commercial terms also increased. The high growth of 1980s that was largely financed by internal and external debt shook the confidence of the creditors. In 1991 foreign exchange reserves just Rs.5, 541 crores and imports of Rs.43, 196 crores against exports were valued at Rs.32, 553 crores in July 1990. The economy was in deep crisis along with weakening of international confidence. But this adversity had its own uses.
ECONOMIC POLICY OF 1991
From 1947 to 1991 India was under social democratic-based policies. The economy was characterized by protectionism, public ownership extensive regulation, slow growth, pervasive corruption. Since 1991, continuing economic liberalization has moved the country toward a market-based economy. Due to the fall of the Soviet Union and the problems in balance of payment accounts, the country faced economic crisis and the IMF asked for the bailout loan. The adverse economic situation made the Government of India review the polices followed in the preceding four decades, take a "U" turn and try to pull the economy from the brink of disaster and the verge of bankruptcy. In fact the per capita NNP - 1.5% and growth rate of NNP (at factor cost in 93-94 prices) in 1991-92 was just 0.5%. Dr. Manmohan Singh who was the Finance Minister in the Government of Prime Minister Mr. P.V. Narsimharao presenting the Budget for 1991-92 asserted - there is no time to lose. Neither...