The 12th largest economy in the world in terms of the market exchange rate, the Indian economy has come a long way to become one of the fastest growing economies. In order to have an idea of the various economic stages, one needs to make an analysis of the Indian economy history.
The pre-colonial era of Indian economy
India is one of the world's oldest civilizations. The main source of economy and income for the people in the ancient ages was agriculture. The fertile plains, rivers and water bodies and a favorable climate provided a wonderful scope for agricultural produce in the country. The ancient civilizations of India like Indus Valley, the Aryan civilization, Mauryan Empire, Gupta Empire and most other dynasties had a planned economic system. In some dynasties, even coins were issued. However, the chief form of trading in those times was the barter system. According to the economic rule, the farmers and villagers were required to provide a part of their crops or produce to the kings or the landlords.
Even in the Muslim rule, the economy of India was mainly based on agricultural produce. Towards the later part of the Mughal period, some trade relations were established between the Mughal Empire and the British, French and Portuguese merchants. Eventually, after the Battle of Plassey, the British East India Company eventually came into power. Thus the colonial rule in India started.
The colonial era of India is a significant part of the India Economy history. It brought a considerable change in the process of taxation from the revenue taxes to the property taxes which resulted in large scale economic breakdown. In fact a number of industries like the Indian handicrafts industry suffered huge losses. During India's freedom struggle, the Indian Nationalists advocated for the Swadeshi Movement in which the British products were boycotted.
However, the British rule also developed the country to a great extent. The financial and banking system as well as free trade was established, a single currency system with exchange rates was brought into being, standardization of weights and measures took place and also a capital market came into existence. Stress was also given to the development of infrastructure and new telegraph lines were laid, railway lines were constructed and roads were made.
Post-Independence to the 1990s
After India gained independence, stress was given to stabilize the economic system of the country. Wide scale development was made in sectors such as agriculture, village industries, mining, defense and so on. New roads were built, dams and bridges were constructed, and electricity was spread to the rural areas to improve the standard of living.
In the subsequent Five Year Plans, a number of economic reforms and policies were formulated. Public and rural sectors were developed, emphasis was given to increase the quantity and quality of the export items, making the country self-sufficient and minimize imports and other related reforms. The political leaders also put stress on business regulations, central planning and nationalization of the industries in mining, electricity and infrastructure.
Another major economic reform that was initiated in the 1960s was to make India self-sufficient in food grain production. In this regard, the Green Revolution' movement was initiated for aforestation, more irrigational projects, improved seed usage, better farming techniques and use of fertilizers and lots more.
In the 1980s, the first step towards market liberalization was undertaken by the then government headed by Rajiv Gandhi. In his tenure, restrictions on a number of sectors were eased, pricing regulations were abolished and efforts were made to improve the GDP of the country.
From 1990s to the present times
India's economic condition in the initial stage of the 1990s was dismal. The main trading partner, Soviet Union was dissolved and India faced huge balance of payment problems. The loans kept on increasing and the IMF asked for a bailout loan. In this situation, Manmohan Singh, the then Finance Minister initiated the liberalization plan. This is one of the milestones in the history of Indian Economy. In the liberalization plan, foreign direct investments were welcomed, public monopolies were abolished and banking, service and tertiary sectors were developed. Boost was also given to develop the money and capital market.
Since the open market plan in the 1990s, India has experienced favorable economic growth. Today it has become one of the fastest growing economies in the world with a GDP growth rate of around 6-7 %. To complement the growing GDP, the country has also experienced growth in per capita income, standard of living and industrial development.