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The economy of India is the eleventh largest in the world by nominal GDP and the third largest by purchasing power parity (PPP). The country is one of the G-20 major economies and a member of BRICS. On a per capita income basis, India ranked 140th by nominal GDP and 129th by GDP (PPP) in 2011, according to the IMF.
After the independence-era Indian economy (before and a little after 1947) was inspired by the Soviet model of economic development, with a large public sector, high import duties combined with interventionist policies, leading to massive inefficiencies and widespread corruption. However, later on India adopted free market principles and liberalized its economy to international trade under the guidance of Manmohan Singh, who then was the Finance Minister of India under the leadership of P.V. Narasimha Rao the then Prime Minister who eliminated License Raj a pre- and post-British Era mechanism of strict government control on setting up new industry. Following these strong economic reforms, and a strong focus on developing national infrastructure such as the Golden Quadrilateral project by Atal Bihari Vajpayee the then Prime Minister the country's economic growth progressed at a rapid pace with very high rates of growth and large increases in the incomes of people.
India recorded the highest growth rates in the mid-2000s, and is one of the fastest-growing economies in the world. India has recorded a growth of over 200 times in per capita income in a period from 1947 ( 249.6) to 2011. The growth was led primarily due to a huge increase in the size of the middle class consumer, a large labour force, growth in the manufacturing sector due to rising education levels and engineering skills and considerable foreign investments. India is the nineteenth largest exporter and tenth largest importer in the world. Economic growth rate stood at around 6.5% for the 2011ââ‚¬"12 fiscal year, as against 8.4% achieved in each of two preceding years. The sharp decline in India's GDP growth rates is mainly due to the Central bank's high-interest regime & it is widely believed reduction in key interest rates would immediately boost India's growth to over 8%, easily making it world's fastest economy. But the Central bank is keen in curbing inflation to less than 5% as against present levels of 7.5% (out-pacing growth) and hence it has refrained from slashing down interest rates which would cause the inflation to spiral out of control ultimately neutralizing growth rates.
Features of Indian economy
The fundamental feature of the new economic policy is that it provides freedom to the entrepreneurs to establish any industry/trade/ business venture.The entrepreneurs are not required to get prior approval for any new venture. What they need is that they have to fulfill certain conditions to get into a line of one's choice.The procedure involving a case by case examination of the proposals for new ventures has been wiped off. Apart from this the entrepreneurs no longer need licenses to come into business. The capital markets have also been freed and opened to the private enterprises.
2. Extension of Privatization:
Another feature of the new economic policy is the extension in the scope of privatization. Now, the majority of economic activities will be conducted by the private sector. In the wave of privatization, out of 17 industries reserved for public sector, 11 industries have been given to the private sector. Moreover, Governmentt has also privatized the ownership of some public sector undertakings by the sale of capital of some selected enterprises to the private sector. The field of privatization has further been extended by offering greater opportunities of investment to the foreign private investors. Economic Policy seeks to accord priority role to the private sector. Tendency to expand private sector is evident from the following facts:
3. Globalization of Economy:
The new economic policy has made the economy outwardly oriented. Now, its activities are to be governed both by domestic market as also the world market. It means unification of the domestic economy with the world, economy. In fact, this has become possible by various policy initiatives taken by the Govt. For instance, devaluation of rupee in June 1991 was intended to do away with the artificially controlled overvalued exchange rate of the rupee.
4. Market Friendly State:
The role of the state is one that is confined to selected non-market areas and is largely to ensure a smooth functioning of the market economy. As compared to past, the ownership of some selected enterprises has been transferred to private sector. Its activities as owner of resources have been confined to two types of activities. One covers the activities which are badly needed for the operation of the economy and the other pertains to social services such as education, health, etc. However, more importantly, the state is to ensure a smooth functioning of the market. For this, the state has to ensure stability in the market through the use of macro economic policies. The state will also intervene in the market when it fails.
New economic Policy accorded high priority to modern techniques. It aims at to augment the growth rate of sunrise industries. In order to import technical dynamics to Indian industry, the Government, decided to clear all foreign collaborations. Private entrepreneurs will be free to settle the terms of such collaborations on their own behalf. Moreover, Government has also been trying to stimulate private entrepreneurs to establish their own research and development centers by offering them various tax concessions. Efforts are also being made to revive and modernize the sick industrial units both within the public and private sectors.
6. New Public Sector Policy:
Public sector attracted priority. In the words of Dr. Manmohan Singh, Finance Minister in Congress Govt. that this priority was given to the public enterprises in the hope that it will help to accumulate capital, industrialization, economic growth and removal of poverty. But none of these objectives were achieved. Thus, new economic reforms are trying to shift the emphasis from public to the private sector.
Recent economic growth in India
Clearance to FDI in multi retail brand
In a historic decision Indian government cleared 51% FDI in the retail sector. FDI is investment directly into a country by a company located in an country, either buying a company in the target market or by expanding operations in that country. FDI is one citing the availability of cheap labor.
Clearance to FDI in broadcasting
The government on Friday has raised foreign direct investment (FDI) limit from 49% to 74% in various services of the broadcast sector.
To ensure basic education to all
Indian government has introduced various reforms for development of education sector in India. That includes opening of various schools so that basic education is provided to the children in country..
Heavy investments in Social Infrastructure
Indian government has invested $ 1 Trillion on the infrastructure sector in India.
Invest in Entrepreneurism
Indian government taken various steps to encourage introduction of various entrepreneurships as the future of the country depends on the level of innovation in the country which in turn depends upon the number of entrepreneurs in the country.
Yes, the Indian economy is flourishing because of allowance to FDI in retail and broadcasting this will create more job opportunities for the young Indian population and also, it will reduce the presence of middleman between the farmer and the retailer. Farmers would be able to sell their products directly to the retailers and incur huge profits margin so that will enhance their financial stability. The broadcasting sector will be able to generate more investment as foreign investors are readily available to invest in Indian markets. They were waiting for the clearance of FDI in Indian broadcasting sector. With the entry of new entrepreneurs Indian economy will definitely prosper as they will bring a fresh blood into the working of the economy by having the optimum utilization of resources available to them in more effective and efficient manner.
Countryââ‚¬â„¢s government can follow these measures:
Introduction of FDI in other sectors also so that level of unemployment decreases.
Reforms for education industry.
Policies for restructuring of economy.
Eradication of corruption from the economy.
Introduction of various other services.