When India secured independence from the British empire in 1947, the economy, which had just taken a beating from the second world war, had to once again withstand the repercussions of Indo-Pak partition. India had to deal with large scale refugee camps, poverty, illiteracy, health hazards and many social and economical problems.
Keeping these problems in mind, the new government headed by Pandit Jawaharlal Nehru adopted a socialistic economy for India. This saw the birth of large scale Public Sector Undertakings (PSUs) foraying into capital intensive businesses such as transportation, road, mining, steel, heavy electricals, among others that are crucial for economic growth. As these businesses require large scale capital investment and would take a long time to break even, no private investor would willingly invest into such businesses. So, there is no denying the fact that the government of India took the right steps by laying a strong foundation for Indian economy. But for these public sector investments, India would be no better than Pakistan or Bangladesh as of today.
Today, we find many successful people criticizing the protectionist policies adopted by the political leaders for many decades since independence. But, they forget the notion that like any child needing hand holding during infancy, the new India full of poor, penniless people, most needed such hand holding till they could start walking. The five year plans and the support programs for the socially and economically weaker sections, increased the per capita income, literacy levels, and living standards of millions of Indians. During the 1980s, the government planted the seeds of economic revolution by realizing the importance of modern technology, market competition, and private entrepreneurship.
Besides the PSUs and the socio-economic programs, another good thing that happened to India was the opening up of the economy also known as Liberalization, Globalization, and Privatization (LPG) in the 1990s as a result of the World Trade Organization (WTO) agreements. Indian industry, that was used to several years of protectionism, initially protested against LPG underestimating the industry's capability to compete with developed nations. However, in few years, Indian industry proved itself wrong. This is evident from the statistics available to us.
The GDP of India has grown from a merge 93.7 billion rupees in 1950 to about 410006.4 billion rupees in 2006. Right from 2003, India is growing at a rate more than 8 per cent. Today, India is recognized for its quality of high technology software services capability throughout the world. In 2005-06, the software industry grew by 33 per cent and the BPO industry grew by 37 per cent. India has good foreign exchange reserves and fiscal deficit is under control. BSE Sensex, which is the barometer of Indian economy, is soaring at about 15,000 points a growth of about 700 per cent from 2002 to 2007. Foreign Institutional Investors (FIIs) are consistently pumping in several billion dollars into the Indian equity market. Foreign Direct Investment (FDI) is a record high in India after the economy was opened up during 1990s.
All these factors prove the strength and the confidence the entire world has in the Indian economy. Multinational financial firms such as Goldman Sachs have forecasted that India will be one of the developed nations by 2040. Research in economics have proved that one of the traits that helps a nation or a community prosper is trust. Indian government under the able leadership of Nehru trusted the socio-economic model, and invested heavily in PSUs and socio-economic policies despite being aware that the benefits are not immediate. And, during 1990s, the governmental policies toward opening up of the Indian economy to foreign competition, allowing FDI in select sectors, privatizing some of the PSUs, among other large scale measures led to India becoming one of the emerging economic giants in the world.>