India became independent in the year 1947, seventy-five years later, the nation’s economy has undergone a transformation as India seeks to join the $5 trillion club. India’s current Prime Minister underlined the need for collective action to achieve $5 trillion economy status, including urging for an increase in the collection of the Goods and Services Tax (GST) saying that though the realisation has improved, “the potential is much more… and it is crucial for strengthening our economic position and becoming a USD 5 trillion economy.”
While earlier this month, the Reserve Bank of India Governor Shaktikanta Das said the country’s economy is an island of stability despite two Black Swan events and multiple shocks. He said the financial stability, macroeconomic stability and resilience of growth is being witnessed despite two Black Swan events happening one after the other and multiple shocks. It is worth noting that in recent times, the coronavirus pandemic and the Russia-Ukraine war have significantly impacted the global economy. So, here is a brief reflection on what has recently shaped the economic development and the transition to millennial India.
India’s Gross Domestic Product (GDP):
The Indian economy is likely to have grown in double digits just in the first quarter of the current financial year, according to latest estimates, while India’s GDP stood at ₹2.7 lakh crore in the year 1947. Notably, India’s independence was in itself a turning point in its economic history, as it was hopelessly poor as a result of steady deindustrialization by Britain. According to the International Monetary Fund (IMF), the Indian economy in 2021 was worth $3.04 trillion, and now happens to be the sixth-largest economy by market exchange rates. Additionally, with its average annual GDP growth rate of 5.8% spanning across last 20 years, India is also one of the world’s fastest-growing economies.
India’s US dollar to Rupee ratio since 1947:
The US dollar was equal to ₹3.30 in 1947, while as of current estimates, India’s rupee stands at ₹79. 6 for US $1. It is interesting to note that the rupee was devalued for the first time by 57% on 6 June 1966 to shore up exports and the move was triggered by the 1965 Indo-Pak war, after which the US withdrew aid to India. While on 1 July 1991, the Reserve Bank of India lowered the value of the currency by 9%, and then by 11% just two days later, this also coincided with turbulent times when the economy was facing its worst crisis.
India’s overnight note-ban:
Easily one of India’s most memorable recent moments leaving an indelible mark on the economy, very few announcements by an Indian prime minister have had as long-lasting and wide-ranging an effect as the one made by Narendra Modi at 8pm on 8 November 2016. In his address to the nation, he said ₹500 and ₹1,000 banknotes, amounting to 85% of the currency in circulation by value, were no longer valid. “Today, I will be speaking to you about some critical issues and important decisions. Today I want to make a special request to all of you,” Modi said. “To break the grip of corruption and black money, we have decided that the five hundred rupee and thousand rupee currency notes presently in use will no longer be legal tender from midnight tonight.”
India’s blanket tax regime:
Another notable moment in India’s economy was when the Narendra Modi government put improving ease of doing business high on its agenda. To make this happen, in July 2017, the government implemented the goods and services tax. This has made India one of the few countries to have an indirect tax law that unifies various central and state tax laws. In spite of a lot of teething troubles and the increased compliance burden on companies, particularly traders and small and medium enterprises, the new system has removed tax barriers across states and created a single common market, ensuring a free flow of goods without trucks being halted at borders for payment of interstate levies.
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