77th Independence Day: A brief look at India's economic growth since 1947

India gained its independence from British rule in 1947, and it has since grown to become the largest democracy in the world. The early leaders of India inherited a nation whose economy had been severely damaged by British rule and the atrocities of partition. For a nation like India, which was ravaged and pushed to the wall, there was only one direction to go: forward. 

For a nation that previously used bicycles and ox carts to transport rocket parts to launch locations, it now intends to become the first nation to land on the southern side of the moon. Here’s a brief look at India’s economy which was in just million dollars in 1947 became a staggering $3.75 trillion economy. 

Millions to $3.75 Trillion GDP

Today, India is aiming to join the prestigious $5 trillion club (GDP basis), Prime Minister Narendra Modi on the day of his reply to the no-confidence motion said, “In the third-term of our (BJP) government, India will become world’s third largest economy.” Currently India is the world's fifth largest economy after the US, China, Japan and Germany. 

In the January to March 2023 quarter, India's economy beat expectations by growing at 6.1% according to latest estimates, while its GDP stood at Rs 2.7 lakh crore rupees in 1947. 

India’s independence marked a turning point in its economic history too, since, as a result of deindustrialization of its economy by the British Raj, the nation was utterly impoverished. 

India made up under 3% of the global GDP at the time of the declaration of independence, or around Rs. 2.7 lakh crores. India contributed $9.5% of the global GDP in 2021, or $3.53 billion, or Rs 285 lakh crores, according to IMFs data. India's GDP last year surpassed that of its former colonial ruler, who reduced the largest economy in the world in 1700 to beggar status in 1947. Additionally, India currently contributes 17% of the global GDP growth, giving it significant economic weight. More significant is the fact that a sizable portion of this increase is driven by internal resources. 

The savings rate has increased from 8% of GDP to 31% now and continues to trend upward. In 1947, India produced over 50 million tonnes of food grains; now, that amount is produced five times as much. The Indian economy has grown to the third-biggest in the entire planet when determined by PPP, or purchasing power parity, and ranks fifth when assessed by nominal gross domestic product (GDP). In 1950, it had a $30.6 billion GDP. India's GDP in 2022 was $9.69 trillion (PPP), or $3.75 trillion. 

India had roughly 340 million people when it attained independence in 1947. At that time, 13% of the population, or 41 million individuals, were literate. India had a population of 1.34 billion people in 2020, and 74% of its population was literate. 

Around 80% of Indians lived in poverty at the time the country gained its independence. In 1956, the Planning Commission's Prof. B.S. Minhas estimated that 215 million Indians, or 65% of the population, lived in poverty (on less than Rs. 220 per year). According to the data from the year 2017, around 21.92 percent of individuals lived below the same poverty limit of 2200 calories per day. 

Demonetisation: A turning point for India’s financial system

Very few statements made by an Indian prime minister have left as significant and broad an impact as the one made by the current Prime Minister Narendra Modi at 8 o'clock on November 8, 2016, easily one of the country's most famous recent moments leaving a permanent mark on the country's economic system. In his speech to the country, he declared that the 500 and 1,000 banknotes, which together made up 85% of the total quantity of cash in circulation, were no longer legal tender.

PM Modi while announcing the demonetisation of then 500 and 1,000 rupee notes said, “We have determined that the five hundred rupee and thousand rupee bills now in circulation will no longer be considered legal tender as of midnight tonight in order to free ourselves from the clutches of corruption and black money." 

US Dollar to INR ratio

In 1947, one US dollar was worth 3.30 rupees; and as of the time of publishing, the Indian rupee is worth 82.97 rupees per US dollar. It's noteworthy that the 1965 Indo-Pak War, which saw the US cut off funding to India, was the catalyst for the rupee's initial devaluation by 57% on June 6, 1966, in order to promote exports. While the Reserve Bank of India devalued the rupee by 9% on July 1, 1991, and by 11% two days later, both of these events took place during tumultuous times when the economy was experiencing its greatest distress.