Economic Growth and Development in India

Economic Growth and Development in India

The quality of life is measured through the rates of economic growth and development within developed and developing countries. Indeed, these two measures are highly important in ascertaining the improvement in the living standards of the specific country. Economic growth is a pointer of the positive change in terms of services and production in a country within a specified period of time. On the other hand, economic development is wider and incorporates the advancement and complexity of a country through the betterment of human welfare. As such, the two terms, albeit related, are not synonymous in their definitions or meaning. Normally, the rate of economic growth is measured through the real growth of a country’s total output of services and goods which is indicated by the gross product and adjusted for inflation or real GDP. Other measures of economic growth include the consumption per capita as well as the national per capita income. In this paper, an overview of the economic growth and development of India is conducted with regards to its developing status.

India is a developing country with one of the largest population in the world at around 1.2 billion people. In fact, the population of India is only matched by that of China at first place. Despite its developing status tag, India has been touted as one of the fastest growing countries in the world. Since 2004, the country has maintained an economic growth rate of over 9% and is second only to China in the world. Prior to this period, the country’s growth rate stuck at about 3.6% during the 1970s (Kholi, 2006). In the following decades, the country witnessed an increase in its growth rate to reach the 5.6% mark per annum. However, despite the current growth rates being impressively high, a large proportion of Indians live below the universal poverty level. In fact, the country houses about one third of the world’s poor population, a figure that is larger than the poor people of the entire Sub Saharan Africa. This scenario is a perfect example of the existence of economic growth and the absence of real economic development for the people. Indeed, India presents a classical example of the interrelatedness and differences of the two terms. That notwithstanding, a positive economic growth can rightly be used to insinuate a positive economic development.

The journey of India’s positive growth and development can be traced from the post independence period when it adopted the five year plans of growth. Following this period, the country has witnessed significant improvement in terms of economic and social development. Such indicators as the Balance of Payments and service sector growth can be cited as important indicators of India’s development after the post-reform period of 1991. Moreover, the country’s resilience to external shocks is evidenced through the sustenance of high economic growth rates when the rest of the developed world was stuck during the world recession of 2008. In the period starting from 20004 to 2011, the country has maintained an annual growth rate of more than 9% with the exception of 2008 when the country faced some setbacks occasioned by the global recession. Although the country did in fact bear the shock and maintain an equally high growth rate of 6.5%, its development was partially hampered during the period (Dreze & Sen, 2009). In the following years, the country’s annual growth reverted to its rate of between 8 and 9 percent.

The economic growth witnessed in India has transformed most of the sectors that the country undertakes and is the reason for the economic development in the country. Perhaps the most affected sector is the agricultural market which is the mainstay and one of the largest practiced occupations in the country. Indeed, agriculture and related sectors employ more than 60% of the total Indian labor force and is the largest player in the economic growth and development of the country. Although the sector has undergone a steady decline in its share of the GDP over the years, it is still a primary source of income for millions of Indians. The growth of the agricultural sector has maintained a rate of between 2 and 4 percent over the last two decades. The country has emphasized on the need for inclusive growth as envisioned by its economic growth plans with the current 11th plan advocating for inclusive growth in reducing poverty levels (Ravallion & Datt, 2012). In addition, other disparities are also gaining increased attention in the economic growth and development of India including safeguarding of the environment and reduction of unemployment. Ultimately, the growth and development of the country is testament of the need for inclusivity in attaining better livelihoods for the people.

Despite growth in the economy and the ultimate reduction in income poverty, the country still faces challenges of total poverty alleviation. More than 300 million Indians live below the poverty line with 80% of these people depending on agriculture for their sustenance. Also, most of the poor people are based within rural areas thus rendering important and basic services inaccessible to the people. In a bid to bridge the gap between the poor and the rich, the government has initiated subsequent programs geared towards alleviation of poverty. Although these programs have contributed towards the well being of the people, their effects are short term and do not normally extend to the future. For instance, the National Employment Guarantee Scheme provide at least 100 days of wage employment to people from poor backgrounds but it does not guarantee them jobs in the other days (Datt & Ravallion, 2012). Although the bulk of unemployment people reside within the rural areas, the problem extends to the entire country. In fact, a significant number of the unemployed people reside in urban areas thus making life even harder for these people.

Lately, however, the government has initiated programs aimed at attaining employment for the poor people. That notwithstanding, about ten percent of the total labor force in India remain unemployed and confined within rural areas where access to basic services is limited. In addition to the high level of unemployment, the country is faced with disguised unemployment especially within the agricultural sector of the economy. Perhaps a source of motivation for India would be the fact that the entire world is grappling with cases of unemployment. In the developed world, countries like the US have witnessed increases in the rates of unemployment in recent years following harsh economic times. However, the outcome of this unemployment may be a curse for developing countries such as India as the US and other developed countries flexes their muscles in protecting their national interest. In this regard, therefore, India should be prepared to effect counter measures in case of changes in policies among the developed partners. It is expected that the developed world may enact policies that may negatively affect the employment situations in developing countries thus worsening the situation in India. The problem of unemployment notwithstanding, the country has undergone immense growth and development.

In addition to development of agricultural sector, the industrial sector has also undergone increased growth over the recent past. The significance of the industrial sector in Indian economy is evidenced through its contribution to a quarter of the total GDP (Kohli, 2006). Also, the industrial sector provides employment to twenty percent of the entire work force in India. A large part of the reasons for industrial growth within the country stems from the socialist policies that have inspired the country for many decades. In fact, the country adopted state ownership of important and significant sectors after the independence thus aiding in development of the industrial sector. Further, the country has remained isolated from the worlds due to its socialist policies and is clogged by government red tape and extensive regulation of the industrial sector. While the country could be termed as somewhat dictatorial and suppressive of business liberty, there is considerable success in industrial development. However, the opening up of the country’s industrial sector in later years has resulted in increased growth and development. Such steps include the adoption of a free market economy and the liberalization of the economy following the reforms of 1991. In subsequent years, successive governments have renewed the fundamental reforms and maintained free market economy thus allowing for increased investments in the industrial sector. It is these investments that have resulted in the development of the industrial sector and the eventual employment of more people.

Similarly, the market and economic reforms implemented within the country have resulted to the diversification and enhancement of the service industry. In recent years, the sector composed of the service industry has recorded significant growth following the implementation of liberal economic policies in the country. In fact, the fastest growing sectors of the economy include the IT and IT related service industries (Ravallion & Datt, 2012). Also, business process outsourcing has gained immense ground in India resulting in an increased use over the recent past. The IT industry has resulted in the creation of more than five million jobs in the country following increased demand for services based in India. Foreign firms have contributed to this growth through demand for service exports as well as the outsourcing of services to Indian firms. Skilled manpower by Indian firms has also contributed to the advancement of the IT sector thus adding onto the number of jobs available for Indian nationals. Today, the growth of the service sector has resulted in the shift of the Balance of payments in favor of India. Consequently, the country now boasts of one of the fastest growing economies in the world yet it is a developing country.

Perhaps the best measure of a country’s economic growth and development is its place in the social improvement of citizens. Such metrics as education and health provide significantly insights into the growth and development of an economy. In particular, development cannot be deemed to have taken place in the absence of social improvement of the people living within an economy. Over the recent past, India has embarked on a social development trajectory as evidenced by improvements in social sectors such as education and health. These developments are in sharp contrast with the past where the country had no visible social developments and was considered the cradle of poverty. Although the country still ranks high among the poorest people, the situation is bound to change with the improvement of livelihoods witnessed in recent years. Indeed, the country is one of the fastest growing and its GDP per capita continues to increase with every passing year. Obviously, the country cannot be witnessing all these social developments in the absence of real development and growth in its economy.

One of the biggest pointers of India’s growth and development is its strides in the education sector over the past few decades. In the past, the education sector had been neglected and resulted in the poor quality of education and the minimal reforms in the sector. However, over the recent past, the country has had a big shift resulting in the recognition of education as a major player in the development of the country. Today, India boasts of thousands of international students who prefer the education model especially in the field of medicine and engineering (Dreze & Sen, 2006). The current five year plan has been termed as an educational plan owing to the commitment of massive resources in the betterment of the education sector. Indeed, the government has committed more than 6% of the total GDP to the education sector covering different pyramids of education in the country. Today, Indians are provided with free access to elementary education up to the age of 14 making education a compulsory undertaking in the country. Most importantly, the government has shifted its focus regarding higher education and concentrated in its betterment including and not limited to technical education. The creation of an enabling environment has also resulted in the venturing of private education players thus improving the teaching standards as well as the quality of education offered to students. These developments follow years of education reform and economic liberalization thus attracting foreign schools and universities to the country.

Still, the country has invested heavily in the health sector to improve the quality of services offered to the citizens. In this regard, India is now a health hub that houses patients from all over the world and with high success rates in the treatment of chronic diseases such as cancer and heart conditions. The improvements in health follow the realization that a country’s development is dependent on sound health of its people through increased labor productivity. Today, the government has a mandate of providing all the requisite health care centers to different sections of the society. The people living in rural areas have more access to health care than they did in the past owing to increased commitment by the government to offer quality healthcare. The city and district hospitals coupled with rural health centers provide primary healthcare to all the citizens thus guaranteeing the people a good health. Indeed, India’s investment in healthcare can be seen in its commitment to spend more than 6% of its GDP in healthcare, a figure that was relatively higher compared to other developing economies at the time (Kohli, 2006). These investments seem to have paid off as there is an increased growth of medical colleges in the country as well as an increased development of health centers. The ultimate result is that the general health of the people is increased thus resulting into a healthier population that can steer the country’s development.

The country’s growth and development cannot be quoted in isolation of the huge investments in infrastructure witnessed over the recent past. Indeed, infrastructure is an important recipe in any form of development and India seem to have realized this axiom from the very start. The country has continuously invested in the sectors of gas, electricity, roads and railways as well as airport and sanitation facilities. Further, the government encourages irrigation of farms and the improvement of storage facilities to ensure safeguarding of harvests. Despite these investments, the country is still below par in comparison with other countries thus rendering its infrastructure costly and ineffective. Any ambitions of a double digit growth rate must be coupled with increased investment in India’s infrastructure. Although the investments are still deficient, the current plan has increased the allocation of resources to infrastructural development by about 150% (Datt & Ravallion, 2012). Evidently, the government is committed towards the improvement of infrastructure but the efforts must be stepped up to achieve considerable growth rates in future.

There is an evident relationship between political reforms and economic growth and India is a perfect case in point. A long period of peace and stability has resulted in the growth and development of the country over the years setting it apart with other developing countries. Indeed, today’s growth is in contrast with that of the past years when India was embroiled in civil war and is testament of the role of sound governance in protecting the growth prospects of an economy. The reforms witnessed with successive governments have sustained the country’s growth through harmonized relationship between different players in governance. Most of the players have the interests of the public at heart resulting in better performance and an inclination of policies for the benefit of the people. Consequently, India’s sound governance can be attributed with the positive growth and development of the economy in the past years (Kohli, 2006). Honesty and fairness among government officials and bureaucrats has increased in recent years resulting in better governance and economical growth.

India has traveled through a path of economic development as evidenced through different sectors of its economy. Despite the challenges faced by the country, it is among the fastest growing economies with growth rates higher than those of most developed countries. The country’s commitment to growth is evidenced through its resilience during the international recession of 2008. Developments in the agricultural, service and industrial sectors contribute to the immense growth of the economy in recent years. In addition, the country has improved in its social developments including better quality in education and healthcare. Continued development in the infrastructural segment of the economy is expected to sustain the burgeoning growth of the economy in the near future. The country’s prospects in terms of economic growth and development are high despite high poverty levels. The country’s improvement in these sectors is a positive sign of its economic growth and development despite being a developing country. Overall, the paper finds that India’s overall economic growth and development to be healthy.



Dreze, J., & Sen, A. (2009). India: Economic development and social opportunity. OUP Catalogue.

Ravallion, M., & Datt, G. (2012). Why has economic growth been more pro-poor in some states of India than others?. Journal of development economics, 68(2), 381-400.

Datt, G., & Ravallion, M. (2012). Is India’s economic growth leaving the poor behind?. The journal of economic perspectives, 16(3), 89-108.

Kohli, A. (2006). Politics of economic growth in India, 1980-2005: Part II: The 1990s and beyond. Economic and Political Weekly, 1361-1370.



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