India became independent in 1947, 75 years later the country’s economy has changed as India attempts to join the $5 trillion club. Underlining the need for collective action to reach $5 trillion economy status, India’s current Prime Minister, including calls for an increase in Goods and Services Tax (GST) collection, said that while the realization has improved, “but the potential is much greater … . and it is critical to strengthening our economic position and becoming a $5 trillion economy.”
Earlier this month Reserve Bank of India Governor Shakktanta Das said the country’s economy was an island of stability despite two Black Swan events and multiple shocks. He said financial stability, macroeconomic stability and resilience of growth were observed despite two consecutive Black Swan events and multiple shocks. It is worth noting that the coronavirus pandemic and the war between Russia and Ukraine have significantly affected the global economy recently. Here, then, is a brief reflection on what has shaped recent economic development and the transition to millennial India.
India’s gross domestic product (GDP):
According to the latest estimates, in the first quarter of the current financial year alone, the Indian economy grew in double digits, while India’s GDP was 2.5 €2.7 lakh crore in 1947. Remarkably, India’s independence was in itself a turning point in its economic history, being hopelessly poor due to Britain’s steady deindustrialization. According to the International Monetary Fund (IMF), the Indian economy was worth US$3.04 trillion in 2021 and is now the sixth largest economy by market exchange rates. In addition, India is also one of the fastest growing economies in the world with its compound annual GDP growth rate of 5.8% over the past 20 years.
India’s US dollar to rupee ratio since 1947:
The US dollar was the same €3.30 in 1947, while the Indian rupee is currently estimated at €79.6 for $1. It is interesting to note that the rupee was first devalued by 57% on June 6, 1966 to prop up exports, and the move was prompted by the 1965 Indo-Pak War after the US withdrew aid to India had. While the Reserve Bank of India cut the currency’s value by 9% on July 1, 1991, and by 11% just two days later, it also came at a turbulent time when the economy was facing its worst crisis.
India’s night note ban:
Arguably one of India’s most memorable moments in recent memory, leaving an indelible mark on the economy, very few announcements by an Indian Prime Minister have had such a long-lasting and far-reaching impact as that of Narendra Modi on 8 November 2016 at 8pm. In his address to the nation, he said €500 and €1,000 banknotes, which accounted for 85% of cash in circulation by value, were no longer valid. “Today I will speak to you about some critical issues and important decisions. Today I want to make a special request to all of you,” Modi said. “In order to break the grip of corruption and black money, we have decided that the five hundred and one thousand rupee notes currently in use will no longer be legal tender as of midnight tonight.”
India’s flat tax system:
Another notable moment in the Indian economy was when Narendra Modi’s government put improving business operations high on its agenda. To achieve this, the government introduced the goods and services tax in July 2017. This has made India one of the few countries to have an indirect tax law that unifies various central and state tax laws. Despite many teething troubles and the increased compliance burden for businesses, particularly merchants and small and medium-sized businesses, the new system has eliminated tax barriers between states and created a single common market, ensuring the free flow of goods without stopping trucks at borders for payment of interstate taxes.
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