Essay on the Economy of India !
The Indian economy is diverse and embraces a huge area including agriculture, mining, textile industry, manufacturer and a vast area of other services. There is an enormous shift from what the economy used to be in the distant past.
Indian economy is the third largest in the world, as measured by ‘Purchasing Power Parity’ (PPP). Till today, two thirds of the population depends on agriculture directly or indirectly. Indian economy is somewhat socialistic in its approach but presently India is running with other capitalist country.
Pre – Colonial History
Pre – colonial implies to the period before the advent of the British. Indus Valley Civilisation is considered to be the first of the permanent settlements in the urban areas.
They usually practiced varieties of traders, which include agriculture, domestication of animals, making sharp weapons from copper, bronze and tin and inter-city trading.
Barter system was commonly use in these times although many kings issued coins and revenues were also paid to the rulers. Spices were exported to the Europe, Middle East and south East Asia in exchange of gold and silver.
The rise of the Maratha Empire after the falls of Mughals marked the decline of political stability affecting Indian economy.
Colonial rule brought along with its change in the economic structure of the country. The whole process of taxation was revised, with effect on the farmers, a single currency system with fixed exchanged rates, standardised weights and measures, free trade was encouraged and a kind of capitalist structure in the economy introduced.
They exported the raw materials and manpower and the finished goods were brought back to India and sold at high rates.
These polices were not favourable to Indian Economy. But other developments in transport and communication like introduction of railways, telegraphs and so on were made which affected the economy.
Towards the end of the colonial rule it was seen that development in the Indian Economy was hampered and it was reduced down from its glorious strong economic background.
Post – independence History
There was a basic stress on few things like industrialisation, large public sector, and business regulation, state intervention in labour and financial markets and central planning during this period.
The economy of the country shifted from agricultural, forestry, fishing and textile manufacturing to heavy industries, telecommunications and transformation industries during late 1970s.
In the 1950s the Indian government had undertaken a chain of plans for the economic development. These plans functioned profitably for a while but then again in the long run they showed lese development.
Economic doldrums were a result of structural inadequacies, wars with China in 1962, with Pakistan in 1965 and 71, currency devaluation in 1966, first world oil crisis and few natural calamities.
Major reforms were being made by Rajiv Gandhi in 1980s by restrictions on capacity expansion for incumbents, removal of price control and reduced co-operate taxes.
The year 1991 marked the economic liberalisation initiated by the Indian Prime Minister PV Narashima Rao and his Finance Minister Man Mohan Singh which was in response to a balance-in- payments crises.
Other changes, like abolition of the License Raj, direct investments in many sectors, affected economy. More private sector initiatives were taken up during 1980s and 1990s. 1990 onward, India is enjoying constant growth in economy.
At present, India has a modern stock exchange instead of an outdated one. There has been a rise in the growth in many sectors.
State planning and the mixed economy: Indian economy works on the basis of 5-year plans, which enables an effective and equal distribution of national resources for a balanced economic development.
Mixed economy is the merger of the socialist and capitalist economy. India’s mixed economy has switched roles embracing capitalist economy to greater extent over the past decade.
In India, the public sector covers the railways and postal services. Nationalisation of banks have also taken place, recently phases of privatisation are on the run.
Public expenditure in India basically constitutes capital and revenue expenditure. These are included in central plan expenditure, central assistance and non- development expenditure.
Central plan expenditure is for the allocation of resources in development schemes given in the plans of the central government and public sector undertakings.
Central assistance is the aids provided for plans of state government and union territories. Revenue expenditure consists of revenue defense expenditure, subsidies etc.
Tax system has undergone serious changes or reforms over the years. The Union government levies sales tax on intra-state sale of goods, entertainment, alcohol, transfer of property etc. State government’s non-tax revenues come from grants, interest receipts, and other economic and social services.
The general budget of India is presented by the Finance Minister in the Parliament which is passed by the Lok Sabha. An economic survey is conducted after the budget which involves various NGOs, business people, women organisation and so on.
Indian currency ‘rupee’ is derived from Sanskrit meaning silver and was first introduced by Sher Shah Suri during his reign from 1540 -1545 CE as history puts it. These days Rupee currency comes in denominations of 1,2,5,10,20,50,100,500 and 1000. Rupee is the only payment of debt accepted in India.
India has rich reserves of natural resources. Other natural resources in India include mineral resources. Coal, mica, manganese, bauxite, natural gas, petroleum, diamonds etc are the major availabilities of minerals here. India has 4th largest reserve of coal in the world.
The Reserve Bank of India, National Stock Exchange, Bombay Stock Exchange is located in Mumbai which is the commercial capital of India. India’s monitory regulator, authority and supervisor of the financial organisation are the Reserve Bank of India.
The RBI issues currency and is also the manager of exchange control. The National Stock Exchange is the world’s third largest stock exchange. The stock markets and other securities are regulated by The Securities and Exchange Board of India.
India occupies the second position in the world in terms of farm output. 18.6% of the GDP was contributed by agriculture and related sectors like fishing, forestry and logging and provided employment for 60% of the total workforce.
It has increased due to improvements in irrigation, modern agricultural practices, and technological advancements.
The industrial sector involves the transport, provision of a service such as entertainment, distribution and sale of goods from producer to consumer as may happen in wholesaling and retailing etc.
India ranks 14th in the world in factory output, accounting for 27.6% of the GDP and employing 17% of the total working force.
The service industry in India provides employment to 23% of the workforce. It has a massive share in the GDP, amounting to 53.8% in 2005.
India takes the 15th position in service output. Information Technology, business process outsourcing etc. fall among the briskly growing sectors, adding up to one third of the total output of services.
Banking and Finance:
Banking and finance industry is the strength of Indian Economy. Reserve Bank of India is the supervisor of all major banks in India. Liberalisation has given way for reforms in the banking system.
These reforms were made in the nationalised banks as well as in the insurance sectors, private and foreign concerns. All such economic indicators not only measure/analyse the present performance of an economy, but also help in predicting and forecasting India’s future growth prospects.