Trends in GDP of India

• Pre-Liberalisation Period (1950–1990)

After independence, India adopted a mixed economic model with central planning. During this period, GDP growth averaged around 3.5% per annum—popularly called the “Hindu rate of growth.” The economy was heavily regulated through licenses, quotas, and tariffs. Major emphasis was laid on self-reliance and the public sector. Despite efforts in infrastructure and industrialisation, inefficient policies, low productivity, and limited foreign investment held back growth. Agricultural output improved with the Green Revolution in the late 1960s and 70s, but the industrial sector lagged. This era was also marked by economic shocks from wars, droughts, and oil crises. Overall, GDP growth remained sluggish and unsustainable.

• Economic Reforms Era (1991–2000)

Facing a severe balance-of-payments crisis in 1991, India initiated economic reforms under the New Economic Policy. Structural changes included liberalisation, privatisation, and globalisation. Industrial licensing was abolished, tariffs reduced, and FDI encouraged. The GDP growth rate gradually improved from 1.1% in 1991 to about 6.5% by the late 1990s. The services sector, especially IT and telecommunications, began to emerge as a growth driver. While the benefits of liberalisation weren’t equally distributed, the decade marked a significant turning point. Increased integration with the global economy, reduced fiscal deficits, and rising foreign exchange reserves stabilised India’s macroeconomic framework and lifted investor confidence.

• High-Growth Phase (2001–2008)

The early 2000s saw India enter a high-growth trajectory. GDP growth ranged between 6–9%, peaking at 9.6% in 2006–07. This period was driven by robust expansion in services (particularly IT, finance, and telecom), growing consumer demand, increased investment, and rising exports. Structural reforms, improved productivity, and global confidence in India’s economy contributed significantly. The boom in stock markets and real estate also created wealth effects. Although agriculture remained sluggish, infrastructure and industrial sectors showed promise. The economy became more competitive globally, supported by reforms in banking and capital markets. However, inequality widened, and employment growth remained below expectations despite high GDP growth.

• Global Financial Crisis Impact (2008–2012)

The 2008 global financial crisis impacted India primarily through capital outflows and lower export demand. GDP growth dipped to 3.1% in 2008–09 but recovered to 8.5% in 2010–11 due to fiscal stimulus and monetary easing. Public spending on infrastructure and rural employment schemes cushioned the impact. However, fiscal deficits and inflation surged in the following years. Investment sentiment declined as reforms slowed, and policy paralysis emerged. The Indian economy was also impacted by global commodity price fluctuations, notably crude oil. Although India fared better than many developed economies during the crisis, the slowdown revealed structural weaknesses such as inadequate infrastructure and regulatory bottlenecks.

• Policy Revival and GST Era (2013–2019)

Post-2013, economic sentiment improved with a stable government in 2014. Major initiatives included “Make in India,” digitalisation, and the Goods and Services Tax (GST). GDP growth averaged around 7.2% during this phase, making India one of the fastest-growing major economies globally. Demonetisation in 2016 disrupted short-term growth but increased digital transactions. GST aimed to unify the national market and reduce tax complexities. Foreign Direct Investment surged due to investor-friendly policies. However, challenges like the Non-Performing Assets (NPA) crisis in banks and jobless growth persisted. Despite reforms, sectors like agriculture and SMEs struggled. Nonetheless, the era laid foundations for long-term productivity improvements.

• COVID-19 Pandemic Shock (2020–2021)

The COVID-19 pandemic brought an unprecedented economic contraction. In FY 2020–21, India’s GDP shrank by 7.3%—the worst decline since independence. Strict lockdowns disrupted supply chains, halted production, and reduced consumer demand. Informal sector workers were severely impacted. To combat the crisis, the government launched the Aatmanirbhar Bharat package, worth ₹20 lakh crore, and the Reserve Bank of India implemented accommodative policies. Digital services and agriculture showed resilience, but manufacturing and services suffered. Unemployment soared, and inequality increased. Despite challenges, India used the crisis to push structural reforms in agriculture, MSMEs, and labour laws. By late 2021, signs of recovery became visible.

• Post-Pandemic Recovery and Growth (2022–2023)

India’s GDP rebounded strongly in FY 2021–22 with a growth of 8.7%, driven by pent-up demand, strong export performance, and a revival in manufacturing and construction. The digital economy and fintech sector played a crucial role in supporting consumption. FY 2022–23 saw sustained recovery at around 7.2%, supported by infrastructure push under PM Gati Shakti and robust capital expenditure by the government. Sectors like automobile, retail, and banking bounced back. However, global headwinds like the Russia-Ukraine conflict, inflation, and interest rate hikes by the US Federal Reserve affected market sentiments. Despite this, India maintained macroeconomic stability and continued attracting FDI.

• Recent Trends and Future Outlook (2024 Onwards)

As of FY 2023–24, India’s economy grew by 7.6%, with Q4 clocking 7.8%, supported by manufacturing and government spending. However, forecasts for FY 2024–25 have been slightly lowered to around 6.5% due to global economic uncertainties, high inflation, and fiscal consolidation. Key challenges include unemployment, a widening fiscal deficit, and sluggish rural demand. Yet, India remains a bright spot globally, with projections of becoming a $5 trillion economy by 2027. Future trends suggest increased digitisation, green energy investments, and supply chain diversification. Strategic sectors like semiconductors, EVs, and AI-driven services will play a pivotal role in shaping GDP growth.