Indian Economic growth since 1990

- Presented by Vijay Jagwani

- Akshay Kriplani

Economy before 1990

From FY 1980 to FY 1989, the economy grew at an annual rate of 5.5 percent, or 3.3 percent on a per capita basis Industry grew at an annual rate of 6.6 percent and agriculture at a rate of 3.6 percent A high rate of investment was a major factor in improved economic growth Investment went from about 19 percent of GDP in the early 1970s to nearly 25 percent in the early 1980s Long-gestating, capital-intensive projects, such as electric power, irrigation, and infrastructure. Also, delayed completions, cost overruns, and under-use of capacity were contributing factor to low rate of return on Huge Investments

Economy before 1990

Private savings financed most of India's investment until mid-1980s Further growth in private savings was difficult because they were already at quite a

high level
India relied increasingly on borrowing from foreign sources from mid-1980s

This led to Balance of payments crisis in 1990

To receive fresh loans and for further economic development the Government had to

agree on economic Liberalisation pioneered by Dr. Manmohan Singh

Contribution of Industries
The steady increase in the proportion of services in the national economy reflects increased market-determined processes contribution of various Industries and Prime Sector towards the GDP in 1991

Sector Trade / Transportation / Communication / Finance / Public & Private Sector Services Agriculture / Mining / Fishing Manufacturing / Construction / Utilites

Percentage Contribution to GDP 39.8% 32.8% 27.4%

Population v/s Poverty

The greatest disappointment of economic development for any nation is the failure to reduce more substantially widespread poverty

Period 1970 1980

Population (in million) under Poverty 300

Percentage 50%

1980 1990
1990 1991

220
332

26%
38%

Slower economic growth and higher inflation in FY 1990 and FY 1991 reversed the trend.

Liberalization in the Early 1990s

Liberalisation refers to a relaxation of previous government restrictions, usually in areas of social or economic policy. Liberalization of autocratic regimes may precede democratization Increased borrowing from foreign sources in the late 1980s, which helped fuel economic growth, led to pressure on the balance of payments. The central government fell in November 1990 and was succeeded by a minority government India made various agreements with the International Monetary Fund (IMF) and other organizations that included commitments to speed up liberalization In the early 1990s, considerable progress was made in loosening government regulations, especially in the area of foreign trade The balance of payments crisis of 1990 and subsequent policy changes led to a temporary decline in the GDP growth rate :
Year 1989 1990 1991 GDP growth rate 6.9% 4.9% 1.3%

Annual Growth in per capita Income

Overall, Indias per capita income remains very low as compared to economically developed countries. India's per capita income of US$2,077 per year is 121 percent that of neighboring Pakistan. Yet, India's per capita income is still 67 percent that of China's, 9 percent that of Canada's, and only 7 percent that of the United States.

GDP from 1991 - 2007

India GDP is the culmination of all the differential factors that contributes to the economy of India. India GDP reflects a consolidated report of the performance of the Indian economy. The Indian Gross Domestic Product is determined either by 'cost factor' or 'actual price' method.
GDP Grow th Rate 12 10
No's in %

8 6 4 2 0 GDP 1.3 5.1 5.9

7.3

7.3

7.8 6.5 4.8 6.1 4.4 5.8 4

8.5 7.3

9.2

9.7

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1.3 5.1 5.9 7.3 7.3 7.8 4.8 6.5 6.1 Year 4.4 5.8 4 8.5 7.3 9 9.2 9.7

Inflation from 1991 - 2007

In economics, inflation is a rise in the general level of prises of goods and services in an economy over a period of time. Inflation can also be described as a decline in the real value of moneya loss of purchasing power in the medium of exchange which is also the monetary unit of account.
Inflation 16 14 12 13.5 13.2

No's in %

10 8 6 4 2 0 Inflation

9.6 7.5

10.3

10.2 9.2 7.2 5.8 4.7 4 3.9 4.1 3.8 3.8 4.3

6.4

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 13.5 9.6 7.5 10.3 10.2 9.2 7.2 13.2 4.7 Year 4 3.9 4.1 3.8 3.8 4.3 5.8 6.4

Gross Domestic Product - GDP

The period after the 1990s witnessed sudden incremental growth of the annual average gross domestic product of the Indian economy and till then it used to be

around 4.5% to 5%.

Rise of Indian Information Technology, Indian service industry and the Indian BPO sector, the average Indian GDP skyrocketed to around 6%, during the period from

1988 to 2003.
From the financial year 2004 onwards the average gross domestic product of India 'at cost factor' reflected a stable growth. The Indian GDP registered an impressive growth rate of 8.5% during this period and the present growth target is secured at 9.5% to 10 %.

Current Economy at a Snapshot

The foreign direct investment in the India market amounted to US$12.5 billion and surpassed portfolio investment of US$ 6.8 billion Foreign trade and merchandise exports expected to cross US$125 billion by the end of the current fiscal Provision for national highway development programme to be increased to Rs.9, 945 crore Farm credit target of Rs.225, 000 crore for 2007-08 has been set with an addition of 50 lakh new farmers to the banking system 35 projects have been completed in 2006-07 and additional irrigation potential of 900,000 hectares to be created and training of farmers arranged A pilot programme for delivering subsidy directly to farmers have been arranged Loan facilitation through Agricultural Insurance and NABARD has also been facilitated

Current Economy at a Snapshot

162 new production sharing contracts awarded to Petroleum and Natural Gas sector Bank's differential rate of interest scheme providing finance at the rate of 4% to weaker sections Defense expenditure allocation to increased to Rs.96, 000 crore IT allocation for e-governance to increased from Rs.395 crore to Rs.719 crore Exclusive health insurance scheme for senior citizens Corpus of Rural Infrastructure Development Fund raised substantially

Provision for tourist infrastructure increased to Rs.423 crore

The latest scenario of Indian gross domestic product factor is much higher than the world's annual average GDP of 5.5%. With such rate of economic growth, the Indian economy is poised to become the second largest economy after China in the year 2050.