25 years of liberalisation: A glimpse of India’s growth in 14 charts

“No power on earth can stop an idea whose time has come,” said then finance minister Manmohan Singh quoting Victor Hugo while presenting the Union Budget on 24 July 1991. And with these words started the long and painful process of economic liberalisation in India.

The liberalisation was aimed at ending the licence-permit raj by decreasing the government intervention in the business, thereby pushing economic growth through reforms. The policy opened up the country to global economy. It discouraged public sector monopoly and paved the way for competition in the market.

The policy, which met with wide opposition from within the Congress and even the domestic industry, was seen as the only way out for India after the balance of payments crisis that brought the country to its knees.

However, after the Congress government under PV Narasimha Rao managed to overcome all the opposition and push through the reforms, successive governments too devised similar policies to slowly and surely shed a Nehruvian legacy.

As the nation marks the 25th anniversary of the economic reforms this month, here are 14 charts that will help you find out how the country moved.

Gross domestic product:

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The size of the economy can often give the first impression of the might of a country. GDP gives the total worth of the goods and services produced in a country in one particular year. India’s GDP stood at Rs 5,86,212 crore in 1991. About 25 years later, it stands at Rs 1,35,76,086 crore, up 2216 percent. In dollar terms, India’s GDP crossed the $2 trillion mark in 2015-16. Currently, the country is ranked ninth in the world in terms of nominal GDP. India is tipped to be the second largest economy in the world by 2050.

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Once admonished for its “Hindu rate of growth” – cliché for low rate of economic growth – post-reforms, India remained the second fastest growing economy in the world, behind China until 2015. Especially, between 2005 and 2008, the economy clocked the 9% mark annually. With the NDA government revising the GDP growth figures and China slowing down, India is now being billed as the fastest growing major economy in the world, with a growth rate of 7.6% in 2015-16.

Foreign direct investment

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Before 1991, foreign investment was negligible. The first year of reform saw a total foreign investment of only $74 million. However, investments have steadily risen since then, except for occasional blips between 1997 and 2000 and 2008 and 2012 – owing to the global economic slowdown. As of 31 March 2016, the country has received total FDI of $371 billion, since 1991. The year 2008 recorded the highest FDI inflow of $43.40 billion. The biggest spurt in inflow was between 2005 and 2006 – 175.54%. As of March 2016, India has attracted $10.55 billion worth of FDI. In 2015, India received $63 billion (nearly Rs 4.19 lakh crore) and replaced China as the top FDI destination, according toThe Financial Times.

Foreign exchange reserves:

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It was India’s dismal state of forex reserves that forced the government to bring in economic reforms. Now, 25 years later, forex reserves are at a record high. In 1991, it stood at just $5.8 billion. As of 24 June, the country’s forex reserves are at $360.8 billion. Usually, import coverage of 7-8 months is considered sufficient. The biggest jump in reserves was witnessed between 2007 and 2008 when the kitty bulged 55% to hit $309.2 billion.

External debt:

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As the economy expanded so did the country’s external debt as companies started borrowing from the overseas markets to fund their growth. In 1991, the country’s external debt stood at $83.8 billion. The rise has been steady with the figure in December 2015 hitting $480.2 billion. Though the figure looks huge, as a percentage of GDP the external debt has declined. In 1991-92, external debt as a percentage of GDP stood at 38%. The corresponding figure in 2015 is just about 24%. Between 2007 and 2008, external debt rose by more than 30% which is the steepest rise in the last 25 years.

Foreign institutional investment:

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Unlike FDI, FII investment is not for long term and is sensitive to domestic and international volatility. FII inflows and outflows may often reflect a nation’s economic and political stability. In 1992-93, FII inflow stood at a meagre $4.2 million. By 1994-95, the figure had risen to $2.43 billion. However, there was a net outflow of $386 million for the first time in 1998-99. The reason for this may be the political instability and the Kargil War. Another major outflow was recorded in 2008-09 – $9.83 billion – during the global financial crisis. FII inflow rose to $45.69 billion in 2014-15 from $8.87 billion in 2013-14, a 414 percent spike in just one year. In 2015-16, however, there was a net FII outflow of $2.53 billion.

Sensex:

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Though only around small fraction of the Indian population plays in the share market, the ups and downs in the Sensex reflect the prevalent economic and political scenario in the country. The 30-share index was lingering around the 1000-level in 1991 before crossing the 4,000 mark the next year. However, the Harshad Mehta scam brought about a downturn, with markets ending 1992-93 below the 4,000 mark. The Sensex reached the high point of 15,644 by the end of 2007-08, but fell 38 percent to 9,708.50 points by the end of 2008-09. Since then, the Sensex has risen steadily to reach 25,341.86 points by the end of FY 16.

Per capita income:

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Per capita income is the average income of every citizen arrived at by dividing the GDP by the country’s population. Though purely a statistical exercise which may not necessarily show the true picture of a country’s development, nevertheless the data makes for an interesting read. Between 1991 and 2016, per capita income rose from Rs 6,270 to Rs 93,293. This is a whopping 1388 percent jump. However, there’s nothing to be euphoric about the number. As RBI governor Raghuram Rajan says, with this number we are nowhere near ending poverty. “…We are still a $1,500 per capita economy. All the way from $1,500 per capita to $50,000, which is where Singapore is, there is a lot of things to do. We are still a relatively poor economy and to wipe the tear from every eye, one would at least want to be middle-income around $6,000-7,000 which, if reasonably distributed, will have dealt with extreme poverty. And that is two decades worth of work to be even moderately satisfied,” he said in a recent interview to The Times of India.

Purchasing power parity:

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Purchasing power parity (PPP) gives a comprehensive idea on the standard of living and the cost of living in a particular country. When per capita income of Indians is calculated in terms of PPP, the standard of living has improved for sure. However, the cost of living has risen too. In 1991, per capita PPP was $1,173. In 2014, it rose nearly five-fold to $5,701. Nevertheless, when compared with developed countries, India’s standard of living as well as cost of living is quite low.

Share of agriculture, industry and services in GDP

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The post-reform period shows the gradual decline in the agriculture sector’s contribution to the Indian economy. India’s traditional occupation, agriculture now contributes only about 15% to the GDP, down from 29 percent in 1991. The services sector has taken the lead role in propelling the economy at the global stage. The IT sector has been the torchbearer of the service sector in India. Currently, it contributes around 53 percent to the national economy. In the meanwhile, the industrial sector has undergone marginal growth in the last 25 years.

Power generation and consumption:

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Electricity consumption is a proxy for growth. As a country prospers economically, its power consumption increases too. This has been the case with developed countries such as the US. Post-reforms, per-capita power consumption in India has increased each year. Cumulatively, there has been about 162 percent growth between 1990-91 and 2012-13 – from 291.8 KWh to 765 KWh.

Labour force and employment:

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The labour force in India currently stands at 49.7 crores. In 1991, it stood at 33.7 crores. More or less two-fifth of population is part of the labour force. The most important fact is that the decline in unemployment rate over the last 25 years is only marginal – from 4.3% in 1991 to 3.6% in 2014. The sectoral composition of labour has witnessed a notable change. The agriculture sector, which is considered India’s backbone, now employs less than 50% of the labour force, while industrial and service sectors have marginally surged ahead.

Car sales:

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Source: tradingeconomics.com

With the increase in per capita income, the prosperity of the middle class has also increased for sure. What else describes the rise in car sales in the country. In 1991-92, just over 2 lakh cars were sold. The figure rose to 3, 12,000 by March 1995. The sales crossed the one million mark in 2003-04. The latest figures show that about 20.3 lakh cars were sold by the end of 2015.

Telecommunication:

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The telecom revolution in India can be called the biggest legacy of the post-1991 economy. Telephone, especially wireless, subscription has witnessed exponential growth since the dawn of this century. Telephone connections steadily rose in the initial few years, but could never match the rapid rise of SIM-based mobile subscriptions. In the last eight years, the number of telephone connections has been dipping marginally.

Mobile phones have revolutionised the way Indians communicate. In the last 15 years, wireless subscription has grown by a whopping 28,611 percent. As of March 2016, there are more than 103 crore mobile subscribers in the country. Currently, India is the second largest mobile subscribers in the world after China.

Economic reform is a continuing process and not a one-time action. The present NDA government – which recently opened the defence and aviation sector for 100 percent foreign investment – is carrying forward the legacy of the 1991 reforms. With China slowing down, US slowly losing its clout, and the EU weakening, the Indian economy seems better placed to reach new heights.

This article was originally published for Firstpost.com. My co-author was Mr Kishor Kadam, a data analyst.

Here is the link:http://m.firstpost.com/business/25-years-of-liberalisation-a-glimpse-of-indias-growth-in-14-charts-2877654.html

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Narendra Modi in South Africa: Can ‘rainbow nation’ be India’s pivot to Africa?

Prime Minister Narendra Modi arrived in South Africa on Friday. This is the second leg of his four-nation tour after Mozambique. His visit assumes significance as it is the first state visit by an Indian prime minister in a decade. The importance of the visit is also underlined by the fact that he is going to spend two days in the country, travelling across Pretoria, Johannesburg and Durban. The “rainbow nation” is a major cog in India’s pan-African ties.

India and South Africa have historical ties

Modi has called South Africa an “important strategic partner, with whom our ties are historical and deep-rooted.” Indeed, India , from the time of British rule, has been close to the African nation.

The fact that Mahatma Gandhi began his public life in a racially-segregated South Africa, and Africa’s apartheid-era hero Nelson Mandela was inspired by India’s non-violent freedom struggle stands testimony to the friendly relations between the two countries. India supported the African National Congress during its Apartheid-era struggle, while the party had an representative office in New Delhi.

Symbolically, Modi will undertake a train journey from Durban to Pietermaritzburg Station, where Gandhi was thrown off the train.

South Africa also boasts a strong 1.5 million Indian-origin population, whose ancestors arrived in the country around 150 years ago.

Since the end of Apartheid, bilateral relations have improved significantly. Prime Minister Modi has met his South African counterpart, Jacob Zuma, on a number of multilateral forums like Brics (at Fortaleza in 2014 and Ufa in 2015), the 2015 G20 summit in Antalya and the recently-held India-Africa Forum Summit in New Delhi.

Both nations enjoy buoyant economic ties

India’s economic ties with South Africa are strong. South Africa is India’s second largest trade partner in Africa, after Nigeria. Total trade between the two countries stood at $11.8 billion in 2014-15. Between 2014-15, India exported $5.3 billion worth of items from South Africa, while its imports stood at $6.5 billion in the same financial year. The trade deficit too is narrow – $1.195 billion. It is interesting to know that bilateral trade was just worth $3 million in 1992-93.

While Nigeria is the largest trade partner, most of the trade revolves only around oil. South Africa, on the other hand, is rich in many minerals. This has meant that Indian multinationals like Tata and Mahindra have significant interests in the country.

India, the biggest consumer of the yellow metal, mainly imports gold, but also steam coal, copper ores, and various kinds of minerals, while it exports vehicles and components thereof, transport equipment, drugs and pharmaceuticals, engineering goods, footwear, chemicals, textiles, rice, gems and jewellery among others.

India and South Africa are potential strategic partners

Both nations are claimant to be the next big “superpower” after the US. Both nations are part of several common international platforms. The BRICS which also includes Brazil and China is the one major platform through which both nations have deepened their ties. 

South Africa can be called India’s gateway to Africa. The country is also important from the point of view of its political stability. While the rest of the continent has been constantly troubled by political instability, South Africa has by and large been peaceful and politically stable.

It is also an important part of the Nuclear Suppliers Group. South Africa – formerly a nuclear armed nation, before closing its nuclear program – is a also a rich source of uranium. India is claiming a position in the elite nuclear trade group. However, South Africa is reported to have objected to its entry since it is not a signatory to the Non-Proliferation Treaty. Its support is key for India entering the club.

India-South Africa ties: The way ahead

While the NSG snub might have played a dampener in the otherwise fledgling bilateral relations, there is immense scope for boosting ties between the two countries. Trade may become the biggest guiding force for India-South Africa ties. Bilateral trade is expected to reach $20 billion by 2020.

India is looking to expand its international footprint. With China already playing a lead role in Africa, it is time for India to catch up. The continent, especially South Africa with its strong India ties, can help it do so.

In the diplomatic game that is being played in Africa, the rainbow nation may well be India’s pivot to Africa.

In that regard, Modi’s four-nation Africa tour could be a game-changer for India.

This article was originally written for Firstpost.com. Here is the link: 

http://firstpost.com/world/modi-in-south-africa-can-the-rainbow-nation-be-indias-pivot-to-the-continent-2881506.html