Submitted by: MUHAMMED FAZAL K
India is a new emerging economic power in the world. Though the 21st first decade saw a global level financial crisis, India didn’t wilt under its pressure due to it’s the Government’s progressive policies and full-fledged reforms. Particularly, nationalization and liberalisation were the real saviors of India from the recession. Also, the national sectors and global raid helped to maintain the economy in proper way. Introduction
India is an exponentially growing economic powering the world. Indian economy stands today as one of the influential and attractive economy. The liberalization move by the Government of India in 1990s has given a boost to the Indian economy and put her into a fast track economic growth route. In 2009, Indian GDP based on purchasing power parity stood at 3.5 trillion dollar making it India the fourth largest economy. Its service industry accounts for 62.5% of the GDP while the industrial and agricultural sectors contribute 20% and 17.5% respectively. Its average GDP growth from 2004 to 2010 was 8.40% reaching an historical high of 10.10% in 2006. The GDP expanded 8.9% in the third quarter of 2010. To put to the stock, India had social domestic policies from 1947 to 1991. Apparently, the economy was characterized by extensive regulation, public ownership, pervasive corruption and slow growth. Since 1991, continuing economic liberalisation has moved the country toward a market based economy. A revival of economic reforms and better economic policy in first decade of the 21st century accelerated India’s economic growth rate.
India unaffected of global recession
2010 saw the ghost of great economic recession worldwide. Through collective action the western economies were able to avert a catastrophe. But the economic growth took a severe blow. Amidst such shake up, Indian economy showed resilience. Though the growth declined from 9% earlier to 6.7% last year, India’s performance was remarkable given the economic backdrop. Due to the bleak financial scenario, the stock market took a hit, and so did many brokers. However, most other sectors have managed to hang on until the worst was over. When the major economies like the US and China are affected, India is not immune to the gigantic recession. The primary reason behind the immunity of Indian economy is that India is a domestic demand driven economy, unlike China, which is an export-oriented economy. And the other reason is its demographics. India is much younger nation to its western counterparts.
TWO BASTIONS OF INDIAN ECONOMY
Nationalisation is the act of taking assets into state ownership. Nationalisation made the stability of Indian economy. It is a prodigious step of the then Prime Minister Indira Gandhi. Despite the provisions and regulations of RBI, banks in India except SBI were under private ownership. By 1960, Indian banking was a tool to facilitate Indian economy. Thus the Indian Government nationalized 14 largest commercial banks with effect on July 16, 1969 and 6 more India 1980. Consequently, the nationalized banks grew at 4%, closer to the average growth rate of Indian economy.
Liberalisation and Rao’ reforms
Economic liberalisation of India means the process of opening up of Indian economy to trade and investment with rest of the world. Till 1991 India had an import protection policy wherein the trade with outside was limited to exports. Also India started getting huge capital inflows. India response, PM Narsimha Rao along with his Finance Minister Dr. Manmohan Singh, initiated the economic liberalisation of 1991. Rao’s reforms did away with the License Raj and ended many public monopolies, allowing automatic approval of Foreign Direct Investment in many sectors. The next stage of Indian banking has been set up with the proposed relaxation in the norms of FDI, where all India investors India banks may be given voting rights....