article on economic growth in India
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In the last seven years or so (i.e., since 2004) India has emerged as one of the fastest growing economy of the world. In fact, next to China, India’s growth rate since 2004 is the highest in the world. This is often referred to as India’s growth miracle.
Before Eighties of the last century India’s average growth rate stuck around 3.6 per cent per annum which Late Prof. Raj Krishna called Hindu rate of growth. In the eighties India’s average rate of economic growth rose to 5.6 per cent per annum and further in the nineteenth and up till 2002-03 (i.e. in 12 years period). India’s average growth rate went up to 6.2% per annum under liberalisation and globalisation of the Indian economy.
But since 2004 to FY 2007-08 India’s average annual growth rate of GDP rose above 9 per cent per annum. In 2008-09 while the advanced developed countries were experiencing recession (i.e. negative growth), India succeeded in achieving 6.7 per cent growth in 2008-09 which further rose to 8.4 per cent in 2009-10 and 2010-11. However, for the reasons explained later, estimated rate of growth of GDP in 2011-12 fell to 6.5 per cent and for 2012-13 also India’s growth rate is again estimated by Reserve Bank of India to be 6.5 per cent.Now the question is how do we account for such a high growth in GDP from 2004-05 to 2010-11. Growth depends mainly on rate of saving and investment (or, in other words, on rate of capital formation), and improvement in technology or capital output ratio. In India such as other emerging economies, China, Indonesia and South Korea, it is increase in rate of saving and investment (i.e., rate of capital formation) that brought about a sharp growth in GDP since 2004.
Rates of saving and capital formation and GDP growth are given in Table 42.3 Prior to 2003-04 rate of saving in India since 1991 when economic reforms were initiated was in the range of 24 to 26% of GDP. But, as will be seen from the Table 42.3, from 2003-04 to 2007- 08 (that is, prior to global financial crisis) average rate of saving rose to 33.3 per cent of GDP which pulled up the rate of investment or capital formation. As a result, average growth rate of GDP for the five years period (2003-08) rose to 9 per cent. With this India became the second fastest growing economy of the world, next only to China.
HOPE IT HELPED
In the last seven years or so (i.e., since 2004) India has emerged as one of the fastest growing economy of the world. In fact, next to China, India’s growth rate since 2004 is the highest in the world. This is often referred to as India’s growth miracle.
Before Eighties of the last century India’s average growth rate stuck around 3.6 per cent per annum which Late Prof. Raj Krishna called Hindu rate of growth. In the eighties India’s average rate of economic growth rose to 5.6 per cent per annum and further in the nineteenth and up till 2002-03 (i.e. in 12 years period). India’s average growth rate went up to 6.2% per annum under liberalisation and globalisation of the Indian economy.
But since 2004 to FY 2007-08 India’s average annual growth rate of GDP rose above 9 per cent per annum. In 2008-09 while the advanced developed countries were experiencing recession (i.e. negative growth), India succeeded in achieving 6.7 per cent growth in 2008-09 which further rose to 8.4 per cent in 2009-10 and 2010-11. However, for the reasons explained later, estimated rate of growth of GDP in 2011-12 fell to 6.5 per cent and for 2012-13 also India’s growth rate is again estimated by Reserve Bank of India to be 6.5 per cent.Now the question is how do we account for such a high growth in GDP from 2004-05 to 2010-11. Growth depends mainly on rate of saving and investment (or, in other words, on rate of capital formation), and improvement in technology or capital output ratio. In India such as other emerging economies, China, Indonesia and South Korea, it is increase in rate of saving and investment (i.e., rate of capital formation) that brought about a sharp growth in GDP since 2004.
Rates of saving and capital formation and GDP growth are given in Table 42.3 Prior to 2003-04 rate of saving in India since 1991 when economic reforms were initiated was in the range of 24 to 26% of GDP. But, as will be seen from the Table 42.3, from 2003-04 to 2007- 08 (that is, prior to global financial crisis) average rate of saving rose to 33.3 per cent of GDP which pulled up the rate of investment or capital formation. As a result, average growth rate of GDP for the five years period (2003-08) rose to 9 per cent. With this India became the second fastest growing economy of the world, next only to China.
HOPE IT HELPED
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