Growth & Pitfalls of the Indian Economy

Growth & Pitfalls of the Indian Economy

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It is very obvious that the Indian economy was not as progressive and strong immediately after independence as it is after almost 65 years of overcoming the British domination. At the very grass-root level when the country had freed itself from the evil and suppressive clutches of the English, India had a reasonably good foreign exchange reserve which later accelerated the growth of the economy as a whole. 
It also enjoyed a fairly good industrial base which indicated a strong industrial prospect of India. A handful of domestic private entrepreneurs were also ready to break the ice with the first series of investment in independent India. But literacy rate was low as the people in the rural sector, which still occupies the major part of the economy, was poor and could not afford to receive education. But they were diligent and were ready to put in their honest efforts for the industrial development of the country. On the other hand, the well- educated members of the urban sector had funds as well the business ideas. So a combined approach comprising of knowledge, labor and finance was undertaken by the Indian Government to pave the path of economic improvement in the country.
But this joint effort of the rich and educated class and the poor and illiterate group could not be achieved so easily. There was already a feeling of hatred and dissatisfaction existing between these two sections of the society before independence, mainly because of the status difference between the rich and the poor and the financial burden which the rich moneylenders had maintained on the poor farmers for years. And the country produced the same picture even after independence. Moreover, the age- old oppression of the landlords continued even after independence which added fuel to the fire and enhanced the difference between the two communities. So, the cooperation between these two groups could not be achieved so easily.
Communism at that time was a very popular ideology, particularly for its success in Russia. At the same time, capitalism promised success to a nation industrially when the entrepreneurs would be free to take their own business decisions without any outside intervention. But the then Prime Minister of the country, Pandit   Jawaharlal Nehru, never really supported capitalism as he thought that the power of the country would again go into the hands of a foreign country if capitalism was followed in India. Again, communism alone might not ensure the success of India since regular interference of the government in every matter might hamper the smooth progress of the country as a whole. So, the Prime Minister decided to follow a mixed policy, i.e., a combination of communism and capitalism, whereby, the major industrial sectors of the country would be under government control while the small- scale industries would be run by private entrepreneurs. 
This kind of government attitude continued for a long time till globalization when every country started opening up and consequently, every economy became an open one. At that time, the Indian government realized that owing to its heavy interference in the industrial sector of the country, the foreign companies were reluctant to establish trade relationship with India due to complicated paper work and time- consuming legal procedure. This was the primary reason why the Indian automobile industry in the 1990s was characterized by only a few foreign giants like Honda, Yamaha and Maruti. 
It was then that the government followed a Deregulation Policy, thereby decreasing its constant intervention from the industrial sector of the country. As a result, today, a number of foreign companies like Daewoo, Mitsubishi, Opel, Mercedes, Hyundai and many more are entering the Indian automobile market. Significant progress was achieved in other industrial sectors as well as service sectors like banks. Before independence, the entire banking sector was under private ownership. But after independence, in the 1950s, the government decided to bring the entire sector under its control. 
But again, with the growing financial needs of the country, it has allowed the foreign banks like The Royal Bank of Scotland, The American Bank and others to operate in the banking sector of the country. Probably from 2002-03 onwards, privatization of the banking sector was also brought about whereby, a number of private banks came into being like the ICICI bank, Ing Vyasa etc. This has not only increased the competition in the banking sector but has also met the rising credit requirement of the general public. 
The food production also showed a significant rise, particularly after the Green Revolution. So, with the overall progress of the country in almost all the sectors, the GDP (Gross Domestic Product) of India rose very sharply, with the service sector contributing 57.2 % of the total GDP and the industrial and agricultural sectors going at 28.6 % and 14.6% respectively of the total GDP. But according to the survey made in 2009-10, the contribution of the industrial sector dropped down to about 45 %.  
In 2008, India was rated as the fastest growing economy in the world but the growth rate declined to 6.4 %. However, the growth rate improved to 7.4 % in 2009-10, while the fiscal deficit increased from 5.9 % to 6.5 % during the same period.
Today, the Indian economy is rising at a massive rate, though some sectors like agriculture are showing a slight fall in the growth rate and last quarter of this year has dipped. But this will not affect the overall growth of the economy.
Today, the Indian economy is rising at a massive rate, though some sectors like agriculture are showing a slight fall in the growth rate and last quarter of this year has dipped. But this will not affect the overall growth of the economy.
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