Recent Development in Economic Environment in India - Economic Environment, Business Environment | Business Environment - B Com PDF Download

The current state of Indian economy makes it necessary for the Government to put in place a robust and implementable action plan for the revival of Indian economy. The Indian economy is the tenth largest in the world by nominal GDP and the third largest by purchasing power parity (PPP). However, the Indian economy had a different story during the time of independence. The Indian economy was mainly agrarian with a weak industrial base at the time of independence. Efforts made of various governments and successive five year plans did not help India to reach where it was supposed to be. Inspite of various initiatives by champions of economic reform, the economy faced a tough time during the late 1980‟s which accelerated major financial crises during the early 1990‟s in India. The then Prime Minister, Shri Narasimha Rao, along with the then Finance Minister Dr. Manmohan Singh initiated the economic liberalization of 1991. A new policy of LPG, i.e. Liberalization, Privatization, and Globalization was adopted by the Government of India to tackle the economic downturn and financial crisis of 1991. India increasingly adopted the free-market principles and liberalized its economy to international trade since the reform of 1991. The reforms also did away with the License Raj system, reduced the tariff and interest rates, encouraged the automatic approval of foreign direct investments and encouraged the opening of private sectors and disinvestment of the loss making Public Sector Undertakings (PSUs). By 21st century, India had progressed towards a free-market economy, with a substantial reduction in state control of the economy and increased financial liberalization.

India has witnessed a significant growth rate of 7.5% during the late 2000s. The economic growth was mainly driven by the expansion in the service sector and integrating with the world economy. However, there was some serious concern about the jobless nature of the economic growth and the increasing pressure from the international institutions to create more employment by bringing in new reforms. India is still growing at a rapid pace in comparison to most of the developing countries of the world. However, this fact should not deter the policy makers to initiate for further action in creating infrastructure, boosting savings, and encouraging more investment for the growth and development of the economy.