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Indian economy is the third largest economy in the world in terms of purchasing power. It is going to touch new heights in coming years. As predicted by Goldman Sachs, the Global Investment Bank, by 2035 India would be the third largest economy of the world just after US and China. It will grow to 60% of size of the US economy. This booming economy of today has to pass through many phases before it can achieve the current milestone of 9% GDP. If you wish to go for investing in the stock market you need to get some stock tips.
The economic history of India since Indus Valley Civilization to 1700 AD can be said under pre-colonial phase. During Indus Valley Civilization the economy was very well developed. It had very good trade relations with other parts of world, which is evident from the coins of various civilizations found at the site of Indus valley. Then came the phase of Colonization. The arrival of East India Company in India ruined the economy of India. There was a two-way depletion of resources. British used to buy raw materials from India at cheaper rates and finished goods were sold at higher than normal price in Indian markets. During this phase India's share of world income declined from 22.3% in 1700 AD to 3.8% in 1952.
Rebuilding the economy of India
After India got independence from this colonial rule in 1947, the process of rebuilding the economy started. For this various policies and schemes were formulated. First five year plan for the development of the economy came into implementation in 1952. These Five Year Plans, started by Indian government, focused on the needs of the economy. Trade liberalization, financial liberalization, tax reforms and opening up to foreign investments were some of the important steps which also include share market, which helped the economy to gain momentum. The Economic Liberalization introduced by Man Mohan Singh in 1991, then Finance Minister in the government of P V Narsimha Rao, proved to be the stepping-stone for Indian economic reform movements.
To maintain its current status and to achieve the target GDP of 10% for financial year 2006-07, the economy of India has to overcome many challenges.
Challenges before Indian economy:
• Population explosion: This monster is eating up into the success of India. According to 2001 census of India, population of India in 2001 was 1,028,610,328, growing at a rate of 2.11% approx. Such a vast population puts lots of stress on economic infrastructure of the nation. Thus India has to control its burgeoning population.
• Poverty: As per records of National Planning Commission, 36% of the Indian population was living Below Poverty Line in 1993-94. Though this figure has decreased in recent times but some major steps are needed to be taken to eliminate poverty from India.
• Unemployment: The increasing population is pressing hard on economic resources as well as job opportunities. Indian government has started various schemes such as Jawahar Rozgar Yojna, and Self Employment Scheme for Educated Unemployed Youth (SEEUY). But these are proving to be a drop in an ocean.
• Rural urban divide: It is said that India lies in villages, even today when there is lots of talk going about migration to cities, 70% of the Indian population still lives in villages. There is a very stark difference in pace of rural and urban growth. Unless there isn't a balanced development the economy cannot grow.
These challenges can be overcome by the sustained and planned economic reforms.
These include:
• Maintaining fiscal discipline
• Orientation of public expenditure towards sectors in which India is faring badly such as health and education.
• Introduction of reforms in labour laws to generate more employment opportunities for the growing population of India.
• Reorganization of agricultural sector, introduction of new technology, reducing agriculture's dependence on monsoon by developing means of irrigation.
• Introduction of financial reforms including privatization of some public sector banks.
This booming Indian economy of today has to pass through many phases before it can achieve the current milestone. It is very important to overcome and to face the challenges in front of the economy of India in a more efficient and effective way to achieve productive, fruitful and desired results on a continuous basis. Do look at the sensex to get some idea about the stock market scenario.
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