Economic development of India after liberalisation

Economic development of India after liberalisation

Dr.C.PratheepMulamana V & HSS, Anakudy

India: 1947 to 2012

1947 2005/06 2009/10 2011-12

Literacy Rate(%) 18 60 74 74

Life Expectancy (Years)

32 63 65 65

Investment Rate (%GDP)

9 30 38 39

Annual GDP growth rate (%)

3 8.4 8 6.9

Annual Population growth rate (%)

1.25 1.5 1.0 1.0

India has achieved growth in various sectors

Economic development since 1950Year GDP Growth

rate (%)Investment Rate (%GDP)

Year GDP Growth rate (%)

Investment Rate (%GDP)

1951/2-1955/6

3.6 13.64 2000/1- 2004/5

6.0 33.04

1960/1- 1964/5

5.0 15.26 2004/5-2005/06

9.5 34.9

1970/1-1974/5

2.3 18.28 2005/6-2006/7

9.6 36.2

1980/1-1984/5

5.6 22.16 2006/7-2007/8

9.3 39.0

1990/1-1994/5

5.0 28.72 2007/8-2008/9

6.8 35.1

1995/6-1999/0

6.5 28.43 2008/9-2009/10

8.0 38.2

2010/11-2011/12

6.9 NA

Growth rate in India

• Chart

Population, GDP, and GDP per capita at market prices, selected years

1960 Population(in Millions)

GDP (millions constant 2000 USD)

GDP per capita (constant 2000 USD)

1960 435 76283 175

1965 487 91054 187

1970 548 113606 207

1975 613 130913 213

1980 687 152621 222

1985 765 198167 259

1990 850 268023 316

1995 932 345394 371

2000 1016 457377 450

2005 1095 641926 586

GDP per capita (constant 2000 US$), selected comparisons

1965 1980 1995 2004

India 187 222 371 538

Sub-Saharan Africa

485 577 484 537

South Asia 197 234 377 522

E Asia and Pacific

145 273 735 1254

Latin America and Caribbean

2276 3568 3555 3906

World 2843 3974 4748 5516

Contributions to growth (in annual percentage rate of change)

Selected Periods

Output Employment

Output per worker

Contribution of

Physical capital

Land Education

Factor Productivity

1960–73 3.3 2.0 1.3 1.1 -0.2 0.1 0.2

1973–83 4.2 2.4 1.8 0.9 -0.2 0.3 0.6

1983–93 5.0 2.1 2.9 0.9 -0.1 0.3 1.7

1993–99 7.0 1.2 5.8 2.4 -0.1 0.4 2.8

1999–2004

6.0 2.4 3.6 1.2 0.1 0.4 2.0

1960–2004

4.7 2.0 2.6 1.2 -0.1 0.3 1.2

1960–80 3.4 2.2 1.3 1.0 -0.2 0.2 0.2

1980–2004

5.8 1.9 3.8 1.4 0.0 0.4 2.0

Percentage of GDP (at factor costs) by industry of origin

Year Agricultureforestry,fishing, mining,and quarrying

Manufacturingconstruction,and electricity,gas, and watersupply

Trade, hotel,transport, andcommunication

Financing,insurance, realestate, andbusinessservices

Publicadministrationand defenceand otherservices

1950/1 59 13 12 7 9

1960/1 55 17 14 6 9

1970/1 48 20 16 6 11

1980/1 40 22 18 7 12

1990/1 35 24 19 10 12

2000/1 27 24 22 13 15

2005/6 23 24 25 13 14

Indian Industry

Growth performance of the manufacturing sector

• Growth performance has two dimensions: (i) rate of growth of the industrial and manufacturing sectors; and (ii) rate of growth of employment

• Three sources of data: (i) Index of Industrial Production; (ii) National Accounts Statistics; and (iii) Annual Survey of Industry

Rate of growth of the industrial and manufacturing sectors

• Much of the discussion on growth performance is on the basis of Index of Industrial Production (IIP)

• The IIP has three base years: 1980-81 (1980-81 through 1993-94); 1993-94 (1993-94 through 2004-05) and 2004-05(2004-05 through 2011-12).

• We could then splice the three separate series into one with the base year 2004-05.

Rate of growth of industrial and manufacturing sectors over the period, 1980-8 1 through 2011-12

Growth performance: Pre and Post Liberalization

Industry Manufacturing

Pre Liberalization 7.69 7.58

Post Liberalization 6.72 7.24

Industry-wide growth performance of the Manufacturing Sector (average annual growth rates

per annum)

Labour

Trends in Employment (in Millions)Number of persons engaged Rate of growth

1981-82 7.891982-83 8.17 3.441983-84 7.99 -2.101984-85 7.98 -0.161985-86 7.58 -4.981986-87 7.55 -0.461987-88 7.90 4.701988-89 7.86 -0.581989-90 8.26 5.071990-91 8.28 0.271991-92 8.32 0.49Average- pre liberalization period 7.98 0.571992-93 8.84 10.721993-94 8.84 0.021994-95 9.23 4.411995-96 10.22 10.781996-97 9.54 -6.711997-98 10.07 5.631998-99 0.00 -100.001999-00 8.17 0.002000-01 7.99 -2.262001-02 7.75 -2.972002-03 7.94 2.392003-04 7.87 -0.832004-05 8.45 7.412005-06 9.11 7.782006-07 10.33 13.352007-08 10.45 1.20Average-post liberalization period 8.42 -3.07

Growth of PCSDP by Statesstate 1960-61 to 1980-81 1980-81 to 1990-91 1991-92 to 2006-07

AP 0.87 2.98 4.54

Karnataka 1.53 3.13 5.05

Maharashtra 1.75 3.16 4.15

TN 1.02 3.40 4.61

Punjab 2.94 3.43 2.48

Haryana 2.51 3.65 4.07

Kerala 1.23 1.14 4.35

Gujarat 1.10 2.73 5.58

India 1.01 2.80 4.55

04/20/23 22

Growth of PCSDP by Statesstate 1960-61 to 1980-81 1980-81 to 1990-91 1991-92 to 2006-07

Assam 0.47 1.09 1.49

Bihar 0.45 2.50 2.66

MP 0.24 1.16 2.20

Orissa 0.31 2.88 3.75

Rajasthan 0.62 3.17 2.40

UP 0.58 2.37 1.77

West Bengal 0.34 2.31 4.99

India 1.01 2.80 4.55

04/20/23 23

Foreign Direct Investment

• Inward and Outward FDI• Definitional issues• Changes in Government Policies• Magnitude of inward and outward FDI inflows• Country wide and industry-wide distribution• Effect of inward FDI: (i) Overall economic growth;

(ii) exports from India; (iii) non-debt creating way of financing BoP; (iv) technology spillovers

Trends in Net Inward FDI (Millions of US $)

Trends in Net Inward and Outward FDI (Millions of US $)

Net FDI (in Millions of US $) Net Outward FDI Ratio of inward to outward 1990-91 97 6 0.061991-92 129 4 0.031992-93 315 242 0.771993-94 586 3647 6.221994-95 1343 3579 2.661995-96 2143 2660 1.241996-97 2842 3312 1.171997-98 3562 1828 0.511998-99 2480 -68 -0.031999-00 2167 3024 1.402000-01 4031 -759 -0.192001-02 6125 -1391 -0.232002-03 5036 -1819 -0.362003-04 4322 -1934 -0.452004-05 5987 -2274 -0.382005-06 8901 -5867 -0.662006-07 22739 -15046 -0.662007-08 34728 -18835 -0.542008-09 37672 -17855 -0.472009-10 33124 -14353 -0.432010-11 23364 -16222 -0.69

Country-wide distribution of inward FDI

Industry-wide distribution of outward FDI

Direction of India’s Outward FDI

29

30

Industry-wide distribution of Outward FDI

World Bank prediction on Indian Economic Development

For articles,powerpoint etc. visit

www.pratheepc.wordpress.com