The Indian economy at 75

ABSTRACT

India became independent in 1947 and, beginning in 1950, it adopted a democratic constitution and a socialist development model that relied heavily on protectionism, promotion of heavy industries by the public-sector and strict controls on private investment through licensing. While democracy flourished, the economy languished. After three decades in 1980, per-capita incomes had risen barely more than 50%. This failure led to a very gradual process of liberalisation in the 1980s, with a balance-of-payments crisis in 1991 triggering a more fundamental switch to a market economy model. Growth began picking up in the late 1980s and greatly accelerated in the 2000s. Poverty saw a sharp decline in the post-liberalisation era as well. While COVID-19 shock has dented growth, with a number of reforms already in place, prospects for 7–8% annual growth in the forthcoming decades look excellent.