Economic Performance


6.1  Significant Economic Growth


            India has recorded significant achievements along many dimensions of human development since Independence. Important changes, for example, are visible in the social sphere where affirmative action, political organization and collective mobilization are gradually transforming the status and position of many socially backward communities, particularly among those classified as belonging to Scheduled Castes and Scheduled Tribes.  Equally impressive has been the way democracy has taken roots in the country.  The 73rd and 74th amendments to the Indian Constitution ensuring reservation of one-third of seats for women in elections to village level panchayats and nagar palikas have provided a further impetus to democracy, decentralization and local governance.  Several positive changes are beginning to be felt at the grassroot level with women enjoying far greater freedoms than before, with the induction of more and more women into public decision making, and with several thousands of self-help groups, voluntary organisations and civil society initiatives engaged in critical development action.



Impressive Economic Performance


q       Expansion and diversification of production

q       New Technologies, modern management

q       Advances in Science, Technology, Medicine, Engineering and Information        Technology 

q       Between 1950-2000, the index of agricultural production increased from 46.2  to 176.8

q       Between 1960-2000 Wheat Production went up from 11 m. tones to 75.6 million tonnes

q       Between 1960-2000 Rice Production went up from 35 m. tones to 89.5 million tonnes

q       Impressive expansion of industrial and service sectors

q       Index of industrial production went up from 7.9 in 1950-51 to 154.7 in


q       Electricity generation increased from 5.1 billion KWH in 1950-51 to 480.7 billion  KWH in 1999-2000

q       6 to 8% annual growth of GNP between 1994-2000 except in 1997-98



6.1.2        Most noticeable, however, are the expansion and diversification of production.  New technologies, modern management, and the advances in science, medicine, engineering and information technology have increased domestic production of a wide range of goods and services.  Particularly significant has been the increase in agricultural production.  Between 1950-2000, the index of agricultural production increased more than four fold.  Between 1960-2000, wheat production went up from 11 million tonnes to 75.6 million tonnes, and the production of rice increased from 35 million to 89.5 million tonnes. This is no mean achievement for a country that relied on food aid until the early 1960s.  Similarly, there has been a rapid expansion in both the industrial and service sectors.  The index of industrial production went up from 7.9 in 1950-51 to 154.7 in 1999-2000. Electricity generation went up from 5.1 billion KWH to 480.7 billion KWH.


6.1.3        This economic expansion has contributed to a steady and impressive growth in India’s GNP.  With the exception of 4 years, India has enjoyed a positive growth rate in its GNP every year since 1950.  Particularly striking are the higher rates of growth after the mid-1980s, and even more so after the initiation of economic reforms in 1991. Prudent fiscal and economic management enabled India to avert the fiscal crisis that many East Asian experienced in the mid-1990s. On the contrary, India’s GDP grew annually by 6-8% per annum between 1994-2000 except in the year 1997-98 when it grew by 4.8%.


Figure  6.1


6.1.4        As a result, India’s per capita Net National Product (NNP) in 1999-2000 was more than 2.75 times higher than what it was in 1951. Before 1980, the annual average rate of increase of per capita income was around 1.2%.  Since then, there has been a significant change.  In the first half of the 1980s, per capita NNP grew by 2.4%, and between 1985-90, by 3.2% on average every year.  The financial crisis of the early 1990s saw a slowing down in the growth of per capita income, but there has been a quick recovery.  Per capita NNP has grown on average by 4.8% every year between 1993-94 and 1998-99.

Figure  6.2


6.2   Record Of Human Development


            Where we talk of development – it is really human development, which means much more than just an expansion of per capita incomes.  Human development has come to be widely accepted as a process of enlarging choices, expanding freedoms and assuring human rights. It consists of enhancing capabilities – for instance, the capability to live a long healthy and productive life, the capability to acquire knowledge, and the capability to lead a decent life.  Human development consists of promoting freedoms- freedom from ignorance, freedom from hunger, and the freedom to participate in decision-making.  It entails assuring every citizen freedom from fear and repression, freedom from discrimination and exploitation, and the freedom to lead a life of dignity and freedom to be free of traditional social restraints and to achieve full potential so as to lead a life of dignity.  Ultimately, enhancing capabilities and expanding freedoms are what matter to people – both women and men – much more than command over income and material goods.  And freedoms are assured when rights are fulfilled – social and economic as well as civil and political.


6.2.2        Judging development from such a perspective of freedoms and rights differs from the traditional way of assessing progress in terms of higher incomes, or more and better consumer goods, or more schools and bigger schemes.  All these may be necessary, but what ultimately matters is, as Dr. Amartya Sen writes, how free women and men are to “do what they want to do and to be what they want to be”.


6.2.3        The evaluative question to ask, therefore, is how far India’s development over the past 50 years has enriched or impoverished human lives.    The concept of human development has been familiar to economists.  But the adequacy of the standards for tools of its measurement is much debated.  The GDP or GNP was accepted as a measure of the wealth of nations, and its economic performance.  But well being was not necessarily concomitant of wealth.  GNP or GDP does not capture the multi-dimensional character of well being and its evaluation.  GNP merely collects goods as services that can be exchanged for money and not the ‘good and bad’ of the goods and services.  Till recently its concept did not include certain types of work, particularly of women.  GNP does not set-out the ethical and moral issues or the environmental issues in development.  The negative effects of growth is not its concern.  The real questions should thus be: Growth of what, and for whom?  Growth of pollution that calls for more anti-pollution devices?  Growth in crime that employs armies of lawyers?  Growth in car crashes requiring more repair workers?  Growth of incomes only for the richest?  Growth of military weapons?  This is not what most people want, yet all of these can result in a rise in GNP.  Clearly, something is wrong with this form of measurement.  Growth in terms of national incomes alone is far too general and abstract a concept to be a sensible policy objective.8



6.3   Increasing Disparities Of Income


               Market economy has its own negative impact on equality of distribution.  The share of income and consumption of the poorest 20 per cent in India is 9.2% while that of the richest quintiles is 39.5%.  This is perhaps the pattern in the modern market economics.  In USA (1994) poorest 20% of the population had 1.5% share of income and consumption while the richest 20% had 45.2%.  In China (1995), the poorest 20% had 5.5% share and the richest 20% 47.5%.  This reflects, in a non-trivial sense,  the anomalies and inequities of the international economic order.  Over the 30 years from 1960 to 1990 the affluent 20% of the world have enhanced their share of Incomes and consumption to 86% while the poorest 20% have had their share reduced to 1%. 


6.3.2        The Human Development Report (1999) noted of increasing inequalities between the countries.  It says :


“Inequality between countries has also increased. The income gap between the fifth of the world’s people living in the richest countries and the fifth in the poorest was 74 to 1 in 1997, up from 60 to 1 in 1990 and 30 to 1 in 1960.”


“By the late 1990s the fifth of the world’s people living in the highest-income countries had:


·         86% of world GDP – the bottom fifth just 1%

·         82% of world export markets – the bottom fifth just 1%

·         68% of foreign direct investment – the bottom fifth just 1%

·         74% of world telephone lines, today’s basic means of communication – the bottom fifth just 1.5%.



6.4   Social Outcomes Of Economic Performance


            Despite enjoying sustained growth, levels of human development in India remain low.  The latest Human Development Report 2000 ranks India at 128 on the Human Development Index[1] (HDI) – implying that there are only 45 countries in the world that fare worse than India.  Of the countries that fare better than India on the HDI, many are our close neighbours.  Sri Lanka, for instance, reports a HDI value of 0.732 whereas the HDI value for India is only 0.563.[2]


Figure 6.3


6.4.2        India’s low level of human development reflects the persistence of extensive human deprivations. Despite the growth record, India’s backlog of human poverty is indeed enormous.    At the end of 50 years, human poverty still persists in substantial number and the backlog of human deprivations are enormous.



Extent of Human Deprivation in India


q       India ranks 128 on the Human Development index – only 45 countries in the world have a lower human development index than India.


q       Life expectancy at birth is estimated to be 63 years up by 32 years from the life expectancy in 1950-51. But it is 17 years less than of Japan, 10 years less than of Sri Lanka and 7 years less than of China.


q       Wide variations exist in life expectancy between male and female between the States and between the rural and urban areas


§         Life expectancy at birth among Indian women is 63 years – it varies from 57 years in Madhya Pradesh to 75 years in Kerala.

§         The record of Kerala pertaining to life expectancy at birth is impressive. A child borne in Kerala can expect to live longer than a child borne in Washington.


q       260 million people in India live below the income poverty line.


q       Close to 380 million people are illiterate and nearly 2/3rd of them are women.


q       52% married women in the reproduction age group suffer from anaemia – the proportion varies from 23% in Kerala to 86% in Arunachal Pradesh.


q       Nearly 1,10,000 women die during child birth or due to pregnancy related causes - most of them can be avoided.


q       Infant mortality rate have almost halved to 72 births per 1000 births down from 146 in 1951 but in South Asia, India had the slowest rate of improvement in child survival.


q       Wide variations in infant mortality rate extist across the states – it varies from 16 in Kerala to 98 (more than 6 times higher) in Madhya Pradesh and Orissa.


q       One third of all babies in India have low birth-weight; in Sub-Saharan Africa, the proportion is just one-sixth.


q       53% children under 5 years remain malnourished.  Percentage of malnourished children is nearly twice the percentage reported in many parts of Sub-Saharan Africa. 







8 Human Development Report, 1996 page 56

[1] The Human Development Index (HDI) is a composite index based on three indicators: longevity as measured by life expectancy at birth; educational attainment as measured by a combination of adult literacy (two-thirds weight) and the combined primary, secondary and tertiary enrolment ratio (one-third weight); and command over resources needed for a decent standard of living as measured by an adjusted value of GDP (expressed in purchasing power parity dollars).


[2]  Some countries with lower levels of per capita GDP than India report higher values of HDI.  These include, for instance, Mongolia, Tajikistan, Viet Nam and Armenia – countries that have witnessed far greater turmoil and conflict in recent years than India has.