India at 50: A journey of resilience and transformation

Dipak Kurmi

(The writer can be reached at dipakkurmiglpltd@gmail.com)

Half a century ago, India found itself at a crossroads, though it might not have been immediately apparent. The country was grappling with an economic crisis and political instability. A year later, in response to these challenges, Indira Gandhi imposed emergency rule—a drastic measure that was reversed in under two years. However, the most enduring shift came from a subtler, largely unnoticed change: a move away from Gandhi’s pronounced Leftist economic policies. This quiet pivot marked the beginning of the end for India’s prolonged economic stagnation, setting the stage for what would eventually be recognized as the rise of the ‘India story’.

Up until the mid-1970s, India’s economic growth lagged behind the global average. The shift that occurred in the latter part of the decade came on the heels of 15 turbulent years marked by wars, crop failures, and even famine, along with the painful devaluation of the rupee and two major oil crises. These events eroded the nation’s confidence, a stark contrast to the early optimism that had flourished during Jawaharlal Nehru’s leadership.

After the economy found its footing, India entered a 50-year period of consistent growth, outperforming not just low- and middle-income nations but also the global economy. This economic ascent has given India a level of international influence it never had before. However, this success has been marred by persistent challenges—poor socioeconomic indicators and increasing inequality—preventing the country’s track record from truly’shining..’

Before the shift, India’s share of the global economy had been steadily shrinking, dropping from 2.7 percent in 1960 to 1.9 percent in 1975. This downward trend eventually slowed, then stabilized, and began to reverse. By 2013, India’s share of global GDP was still slightly below its 1960 level. However, fast forward to 2024, and India now accounts for 3.5 percent of the global GDP. With an economy growing at twice the global average, India has become the third-largest contributor to global economic growth.

India’s per capita income has seen significant progress over time. In 1960, it stood at 8.4 percent of the global average, but by 1974, it had fallen to 6.4 percent. The situation improved steadily, with per capita income rising to 13.5 percent of the global average by 2011 and further to 18.1 percent in 2023—nearly tripling over five decades. Despite this progress, the standard of living in India remains low compared to most countries. Only a few nations outside Africa and within South Asia have lower per capita incomes. The journey towards a higher standard of living is still long.

What elevates India’s economic narrative is its massive population. While per capita income remains modest, when multiplied by 1.4 billion people, it positions India as the world’s fifth-largest economy. The country is already the second-largest market for mobile phones and two-wheelers and ranks third or fourth in the aviation and car markets. This growth has been driven by an expanding middle class, fuelling industries that have created immense wealth for investors. As a result, India now boasts 200 dollar billionaires, the third-highest number globally, and its stock market is fourth in the world by market capitalization.

Until the mid-1970s, nearly half of India’s population lived below a minimal poverty line. Today, that figure has dropped to under 10 percent. Internationally, India is increasingly recognized as a rising power rather than a nation defined by poverty. However, in terms of human development, India is still classified as a’medium development’ country, while nations like Vietnam have already reached ‘high development’ status. It will likely take India another decade or more to achieve ‘high development,’ and even longer to reach the’very high development’ category that includes developed nations, which remains its ultimate goal.

Nevertheless, progress is evident in key areas. The average years of schooling have increased from 4.4 years in 2010 to 6.57 years today. India now exceeds the WHO-recommended ratio of one doctor per 1,000 people, and life expectancy has finally surpassed the 70-year mark.

Rising incomes are evident in the increasingly diverse and nutritious diets of the population. Milk consumption has surged tenfold, fish consumption has also increased tenfold, and egg consumption has skyrocketed more than twentyfold. Additionally, horticulture—fruits and vegetables—has seen rapid expansion. At the same time, household savings as a percentage of income have risen by 70 percent, while average real incomes have grown sixfold.

Perhaps the most significant shift has been in mindset. In the mid-1970s, India was still deeply entrenched in socialist ideals, marked by widespread nationalization across various industries and strict controls over prices and production, from essentials like paper and steel to everyday items like sugar, cement, soap, and even cars. This approach inevitably led to chronic shortages and thriving black markets. State governments often aligned with trade unions during industrial disputes. Today, however, Indian politics have moved away from socialism towards populism, with Communist parties on the decline. Governments are now focused on reforming labour laws to encourage business growth, and tax rates have become much more reasonable.

Indians have embraced share-market investment with enthusiasm. Back in 1974, the largest public offering of shares amounted to just Rs 12 crore (equivalent to about Rs 350 crore today). In contrast, in recent years, several companies have launched public offerings ranging from Rs 15,000 to 21,000 crore, including giants like LIC, Adani, and Vodafone. A decade ago, mutual funds managed assets amounting to less than an eighth of total bank deposits; today, that figure has more than doubled to over a quarter. Looking ahead, the next five years may see India add more to its GDP in absolute terms than it has in the past decade.

Yet, India’s narrative is never without its counterpoints. The production of consumer durables has remained stagnant compared to seven years ago, while non-durables have only seen an annual average increase of 2.8 percent. This suggests financial strain among consumers, particularly those at the lower end of the income spectrum, likely due to insufficient well-paying jobs. The economy will only reach the 7 percent-plus growth rates that once defined high-growth economies when this issue is addressed.