mises.org / Trisha Mani / November 18, 2016
In recent decades, India has become a frontrunner in global politics representing a powerful bloc of emerging economies that are characterized by high growth rates and an untapped reservoir of human capital. It plays a crucial role in influencing international markets as its borders encapsulate not only some of the brightest minds in a wide array of specialties but also an increasingly unrestricted market that welcomes innovation and celebrates novelty. This historic transformation however came as a reaction to the centuries of colonial exploitation followed by severe stagnation in the decades succeeding independence. By the end of the 20th century, the Indian economy embraced the indispensable and almost inevitable reformation that led to increased economic development.
Prior to this economic reform, the country was plagued with mounting unemployment, acute inflation, and stagnation of economic activities. The government followed a system of five-year plans which dictated the flow of funds to individual sectors. The majority of public expenditure was diverted to the agricultural sector as this constituted a bulk of the nation’s exports. Inflation touched double-digit figures and severely affected the poorest sections of society. The annual GDP growth rate was dismal while the share of exports and imports constituted a meager portion of the overall GDP. The table below depicts these indicators in the period prior to 1991.