An Analysis of Indian Economy

AN ANALYSIS OF INDIAN ECONOMY 1
AN ANALYSIS OF INDIAN ECONOMY
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Introduction
Economic growth is one way of measuring a nation’s prosperity (Acemoglu 2012, p.545). A
nation which has better economic growth is said to have a superpower in terms of development
as compared to other nations below its scoreline in terms of economic performance. Economic
prosperity is brought about by the adoption of sound micro and macroeconomic policies which
foster a nation’s economic growth. It is the wish of every nation to prosper economically.
However, economically prosperity differs globally across nations due to inequality in the
distribution of resources (Mideksa 2013, p.277) and the difference in management competency
of the available scarce resources by a nation.
In this report, the economy of India has been chosen for analysis. Problems facing the economy
and recommendations to solve the problems have been discussed. The conflicts between the
Indian political and economic ideologies about its economy have also been discussed. Stability
faced by today’s societies as well as micro and macroeconomic principles has also been
considered. Therefore, despite every nation’s dream being economic prosperity, various
challenges are encountered in improving and maintaining a nation’s economic growth and the
success of mitigation measures undertaken determines the nation’s future economic
performance.
Background of the Indian Economy
After the British rule, the Indian economy was governed by a combination of policies of Fabian
socialism, protectionist, social democratic and import-substitution (Kumar 2013, p151).
However, after a short while, the economy turned out to extensive regulation and adopted
extensive protectionism and large monopolies were then owned by the public. This led to the

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nation’s sluggish economic growth at the early stages. Since the year 1991, the nation’s
economic liberation has enabled it to shift to a market-based economy hence improving its
economic growth.
Currently, India has a developing mixed economy. The nation has improved its trade freedom
and according to the 2019 Index, it is ranked position 129 with a score of 55.2 in terms of
economic freedom. This is an increment of 0.7 points due to improvement in India’s efficiency
of its judiciary which has highly improved government integrity. Economic liberation has
enabled India to maintain its economic growth which is measured by the gross domestic product
at an average of 6-7 percent. Its unemployment rate is low at the rate of 3.5 percent while
inflation is slightly higher at 3.6 percent. It has therefore been ranked among the fastest growing
economies in the world and has even surpassed China in terms of economic growth. In the Asia-
Pacific region, India is ranked position 31 out of the 43 nations in the region in terms of
economic performance. Its performance is below the expected averages at both the regional and
world levels an indication that still much needs to be done to improve the nation’s economy to a
world-class level. In terms of the nominal gross domestic product, India is ranked position seven
and position 3 in terms of purchasing power parity in the world. India is anticipated to improve
its economic performance in future as its service industry is growing at a fast pace making the
nation the world’s major export of information technology services, soft services, and Business
Process Outsourcing services.
Modern Society Economic Stability
Economic stability is reflected by the nation’s ability to minimize fluctuations in its economic
output by maintaining the stability of its micro and macroeconomic indicators. A stable economy

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improves the nation’s economic growth as investors and businesses within the nation expand
their productivity and foreign direct investments increase due to the nation’s stability.
Today’s modern society is experiencing a relatively stable economy. This has been brought
about by globalization which has enabled many nations to venture into international trade due to
its vast merits. Fragilities related to the crisis that occurred during the past decade have been
decreasing gradually restoring global economic stability. The world economy has improved from
the year 2016 to 2018 from 2.4 percent economic growth rate to 3.0 percent due to the stability
of market exchange rates and the improvement of the purchasing power parities.
However, economic stability in modern society is unevenly distributed across nations. In the
modern society, the developed nations such as the United States and nations in the East and
South Asia are experiencing highly stable economies while the developing and underdeveloped
countries are experiencing relatively low stable economies such as many African nations. It’s
worth concluding that modern society is experiencing a stable economy as nations strive to
improve their economic performance to world levels and hence work towards maintaining their
economies stable to expand the productivity of their economies.
Micro and Macroeconomic Principles
A nation’s economy is categorized into two sectors namely the microeconomic macroeconomic
sectors. Principles formulated by either sector affect the other and hence are interdependent and
act as a compliment to each other.
Microeconomic principles are applied by individuals and businesses in making crucial decisions
on how to efficiently allocate the available scarce resources and price their goods and services to