Globalisation and the economic reforms has transformed India into a world economic power. India has put up an impressive growth performance in the past two decades and yet steered clear of the brunt of the recent global financial crises. The severity and worldwide impact of the global downturn was in many ways an unprecedented event that wrecked economies around the world for more than two years. Indian economy was also no exception and has witnessed a slowdown. However, Indian economy showed greater resilience than most others and was amongst the first few to emerge from the downturn. India has weathered the global economic crisis better than other countries, and for the current year GDP is estimated to grow @ 8.5% and forecasted @ 9.0% in 2011-12. This is based on the expectation of a normal SW monsoon in 2011-12. Current indications appear to strongly endorse the Meteorological Department’s assessment that the current year (2010-11) will have a normal monsoon. The rate of GDP growths for the 2008-09 (Quick Estimates), 2009-10 (Revised) and 2010-11 (Forecast) are given in the table below.
Rate of Growth at factor cost (per cent):
| 2008-09 | 2009-10 | 2010-11 (E) |
Agriculture | 1.6 | 0.2 | 4.5 |
Manufacturing | 3.2 | 10.8 | 10 |
Services | 9.8 | 8.5 | 8.9 |
GDP | 6.7 | 7.4 | 8.5 |
Source: PMEAC July 2010
The Indian economy has experienced some striking changes during the past two decades. The average annual growth in per capita income in real Rupees has risen from 2.5 per cent during 1981–88 to 7 per cent during 2003–09. These past two decades, have seen a significant decline in poverty. Based on the Planning Commission, the proportion of the population living below the official poverty line declined from 39 per cent in 1987–88 to 27.5 per cent in 2004–05. It is essential to sustain the pace of growth and to achieve even higher rate of development so that the fruits of liberalization and economic progress percolate down to the poorest sections of the society. It is, therefore, imperative that a double digit GDP growth is achieved and sustained on long term basis. In order, to achieve the double digit growth rate, it is important that agriculture will have to grow at 4%, manufacturing at 12% and services at 10.5%.
So how does India achieve these anticipated stellar rates of growth?
The situation of the manufacturing sector in India is a cause of concern. India has not been able to fully leverage the opportunities provided by the dynamics of the world economy. A large section of the Indian population still remains dependent on agriculture, which employs more than half of India’s workforce and the output share of this category of sectors is only 19% of the GDP (at factor cost), implying that a very large section of the population was primarily dependent on a very small share of the GDP. India has simply not witnessed the kind of transformation—from a traditional, agrarian structure to a modern, industrial economy—that has been seen in virtually all rapidly growing economies. Therefore, going forward, the central challenge the country faces is to achieve the transfer of its workforce from agriculture to other, more productive activities, namely, manufacturing industries.
Over the next decade, India has to create gainful employment opportunities for a large section of its population, with varying degrees of skills and qualifications. The manufacturing sector is the one which would have to provide for this employment creation initiative and would have to ensure that the growth model of India is sustainable.
Posts
