What’s the True potential of Indian Economy?

India beat their own record of consistent ‘Hindu rate of growth’, pegged at 3%, the rate that prevailed from 1950 upto middle of 1980. It was only during 1985-1989, the regime of the late Prime Minister Rajiv Gandhi, that due to more liberal economic policies, the economic growth moved up on a higher trajectory, from an average of 3% to 5.5% between 1985 to 1990.

Then suddenly, the major economic crises of 1990 called for radical measures to overhaul the entire economic system. Trade liberalization, currency reforms and reforms in the industrial policy along with reforms in other areas like foreign investment etc. pushed the growth rate to an average of 5% to 7%. Subsequently, during NDA’s regime, the growth rate of Indian economy moved further up to an average of 6% to 7% which further went upto an average of 9% between 2004 to 2008.

It is now very necessary that the growth momentum be maintained and pushed further up in various sectors of the economy, if India has to make a mark in the international arena and solve the problem of poverty, unemployment, demographic problems etc.

India had a high share of world GDP till 1800 AD

Both for India and China, the two largest developing economies, the challenge is to reach their true potential. Up to 1200 AD or so, share of India’s economy in the world GDP was more than 30%, which declined to 25% by 1500 AD and from about 1700 AD onwards, the percentage of India’s economy in the world GDP continued to decline till about 1975 and in fact reached its bottom at about 3% of the world’s economy. On the other hand, economic share of countries in Western Europe and USA vis-a-vis the world GDP, continuously increased from middle ages onwards.

Now different international reports estimate that India could yet again rise to be amongst the top and can become the third largest economy by 2050. Goldman Sachs, a consultancy reports that Indian economy could reach US$ 45 trillion by 2050. Similarly, the Economist estimates that Indian economy would reach US$ 30 trillion by 2050 and could thus become the third largest economy in the world. Apart from the size of the Indian economy, the challenge is to lift almost a billion people to the first world economic standards.

Challenge is to uplift vast numbers of Indians at the bottom

The ground reality today with regard to nearly 70% of the people at the bottom is otherwise quite dismal. Our policy makers must make an effort to uplift those earning less than US$ 1-2 per day. In order to bring such vast numbers of people into the economic mainstream and bring them into the group of middle class, entirely different strategies will have to be adopted and hence the focus of economic growth must also shift from the super rich to the average Indian.

A New Shift in policy making desired

The current economic slow down is one of the deepest since the depression and calls for a strategic shift in the new age economic policy making. The policy makers must now keep the interest of the largest majority of Indians in mind for the future.