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Wednesday, December 6, 2023

Bharatiya economy’s seven decades of independence – A review and way forward

In 1947-48, per capita income was Rs. 230. In 2019-20 it rose to Rs. 1,35,000. In 1948, power generation capacity was nearly 2100 MW; length of railway lines was 53,596 Kms. In 2020, the power generation capacity increased to 371.054 GW. The length of railway lines expanded to 68,155 Kms (though not a significant increase).

82% of the population was illiterate in 1948 which reduced to 25.96% in 2020.

Agricultural economy

In 1948, about 70% population was engaged in agriculture. Moreover, agriculture constituted 50% of national income. Agricultural productivity was 110 kg/ hectare for rice in 1947 which increased to around 2,600 kg/ hectare in 2020.

Famines:  Between 1765-1858 the country experienced 12 famines and 4 scarcities. Similarly, between 1860-1908, the country witnessed 20 famines. In 1943, Bengal famine shook the entire country. It is estimated that during 1854-1901, 28.8 million people died due to famines.

In the famine of 1899-1900 2.5 million persons died of starvation. Later famine threats of 1984, 1988 and 1998 were successfully contained by Bharatiya government and there has been no major famine in Bharat since 1943.

In Bharat, the rate of growth of population was about 1.25% per annum during 1941-51. During this period we were adding each year population that was equivalent to the total population in Australia! The annual growth of population has reduced to 0.99% in 2020.

The country had only five central public sector undertakings in 1951 with an investment of Rs. 29 Crores and at the end of second five year plan in 1961 the number of these undertakings went up to 47 with an investment of Rs. 950 crores. In 1970-71, the public sector contributed 14.9 p.c. towards GDP, but it rose to 24 p.c. in 2001-02.

Post liberalization in 1991 the share of public sector investment in Eleventh Five Year Plan (2007-2012) declined to 23 per cent as against 33 per cent in the Ninth Plan signaling the prominent role played by the private sector.

Bharat was having a foreign exchange reserve of around $5 billion during the period 1977- 1992. Thereafter, it has been a steady and exponential rise and this year (2020) it crossed the $ 500 billion mark.


Stagnant Economy: For almost a century, the average annual growth rate of GDP in Bharat was not more than 0.5% during the British era (1850-1947). During the medieval times, Bharat was the world leader in manufacturing, producing 25% of the world’s industrial output up until the mid-18th century, prior to British rule. Bharat’s share of the world economy declined from 24.4% in 1700 to 4.2% in 1950, and its share of global industrial output declined from 25% in 1750 to 2% in 1900.

During the period 1950s to 1980s the average annual GDP growth was around 3.5% which crossed 5% during 1980-1990. Post liberalization it rose to 7% rapidly in the last decade. During 2009 to 2014 the average annual GDP growth rate was around 6.28% and it is 6.98% during the period 2015-2020.

In 1950- 51, net national product at factor cost or national income (at 1999-2000 prices) stood at Rs. 2,06,493 crore. It rose to Rs. 27,60,325 crore in 2007-08 (at 1999- 2000 prices). This figure substantially increased to Rs.129 trillion in 2020 (at 2012-13 prices).

Per capita Net National Product rose to Rs 24,256 in 2007-08 (at 1999-2000 prices) as against Rs 6,122 of 1950-51 at 1999-2000 prices. It further rose to Rs.1,35,000 in 2020 (at 2012-13 prices).

Sectoral share in GDP

Sector Share in GDP (1951) Share in GDP (2019)
Primary sector 55.9% 18.57%
Secondary sector 14.9% 27.03%
Tertiary sector 29.2% 54.40%

Employment pattern

Distribution of workforce 1951 2019
Agriculture 72.10% 42.39%
Industry 10.06% 25.58%
Services 17.30% 32.04%

About 16.4 percent of the total workers are in the organised sector whereas 83.6 percent are in the unorganised sector. Bharat also has a significant number of migrant population who have come to the cities from villages in search of jobs.

Regional Imbalances and Income Inequality

In the year 1960, the per capita gross domestic product (GDP) of Maharashtra, then Bharat’s richest state, was twice that of Bihar, the poorest. At the beginning of the millennium, the per capita income of the five richest states (based on per capita income) in Bharat was 145% higher than that of the bottom states. That difference rose to 289% in 2010-11, and further to 338% in 2017-18. By the year 2014, the gap between the richest state (now Kerala) and Bihar, still the poorest, had doubled.

Despite Bharat’s significant progress in lifting 271 million people out of poverty from 2005-06 to 2015-16, Bharat accounts for 28% of the 1.3 billion multidimensional poor across the globe.

In Bharat, between 1990 and 2018, life expectancy at birth increased by 11.6 years, mean years of schooling increased by 3.5 years and expected years of schooling increased by 4.7 years. Per capita incomes rose by over 250%.

As of 2018, more than 163 million Bharatiyas do not have access to safe drinking water. Over the decade ending 2011, water availability reduced by 15% and it is estimated that Bharat will become water-scarce by 2050.

According to the Credit Suisse data for 2018, the richest 1% in Bharat now controls 53% of the country’s wealth and the richest 5% about 69%. The top decile (or 10%) holds 76.3% of the nation’s wealth. According to the government data the average monthly incomes of the agricultural households which was Rs. 6,426 in 2012-13 increased marginally to Rs. 8,931 in 2016-17 which is very low and not sustainable.

Although estimates suggest that government expenditure in education has increased over the five years, it is still below 6 percent of GDP– a figure that the NITI Aayog suggests is necessary to achieve quality education.

To raise the income of at least 50 percent of Bharatiyas to levels of the global middle class, the economy not only needs to return to 8 percent growth or higher but must also maintain such growth for the next three decades.

Evaluation of post- independence performance

Post-independence Bharat has succeeded in overcoming the famines and we now have more than adequate buffer food stock to take care of almost one year’s requirement of the country. Literacy levels and life span of the people have improved considerably post- independence.

The GDP growth and per capita incomes of the people have increased significantly. We have more than sufficient FOREX reserves to face even a highly volatile balance of payment crisis unlike that of 1990s that pushed the country to mortgage the gold reserves to raise global debt to tide over the crisis. Service exports have increased exponentially neutralizing the deficit in merchandise trade.

Income inequalities and regional imbalances have increased and it was much steeper post liberalization. We still have a long way to catch up with the developed countries in terms of both investment and outcomes in health and education sectors. The desired level of growth in manufacturing sector has not taken place and our infrastructure is not of global standards to boast.

The broad objectives for the coming medium and long term should be:

  • Stepping up the investment in health and education sectors for enhancing the outcomes to match the global standards.
  • Improve the infrastructure by investing heavily in developing roads, irrigation, railways, ports with special focus on developing rural infrastructure like- cold storage, ware houses and other rural supply chain linkages.
  • Special focus on developing the manufacturing sector with greater emphasis on agro-based industries located nearer to the rural areas.

The country also needs to set certain broad targets to be achieved in a decade’s time as under:

Sectoral share in GDP Targets

Sector Share in GDP
Primary sector 15.00%
Secondary sector 40.00%
Tertiary sector 45.00%

Employment pattern

Distribution of workforce Target
Agriculture 30.00%
Industry 40.00%
Services 30.00%

The initiatives suggested as above should result in the following broader outcomes:

  • Inclusive growth and reducing the income inequalities
  • Reducing the regional imbalances
  • Turning from a trade deficit nation to a trade surplus country.
  • Increasing the average agricultural house hold incomes much closer to the national per capita income.
  • Affordable healthcare
  • Literacy levels closer to 100%.

Let us hope the governments (both centre and the states) will deliberate, discuss and decide a plan of action and assign greater responsibility to Niti Ayog in coordinating between the centre and the states to achieve the above suggested broader outcomes with collective efforts.

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Dr. B.N.V. Parthasarathi
Dr. B.N.V. Parthasarathi
Ex- Senior Banker, Financial and Management Consultant and Visiting faculty at premier B Schools and Universities. Areas of Specialization & Teaching interests - Banking, Finance, Entrepreneurship, Economics, Global Business & Behavioural Sciences. Qualification- M.Com., M.B.A., A.I.I.B.F., PhD. Experience- 25 years of banking and 16 years of teaching, research and consulting. 200 plus national and international publications on various topics like- banking, global trade, economy, public finance, public policy and spirituality. One book in English “In Search of Eternal Truth”, two books in Telugu and 38 short stories 50 articles and 2 novels published in Telugu. Email id: [email protected]


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