Economic Development of India: Growth, HDI, Inequality and Poverty

This report analyses the growth and development of the economy of India, including its GDP, HDI, inequality and poverty. It discusses the difference between economic growth and development, and the implications of each. It also provides an economic overview of India and its economic growth over the years.

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TOC
Introduction................................................................................................................................2
Economic Development: Meaning and Implications.................................................................3
India: Economic Overview........................................................................................................4
Economic Growth of India over the years.................................................................................5
Economic Development of India...............................................................................................6
Human Development Index of India over the years..................................................................8
References................................................................................................................................11

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Introduction
The global scenario has experienced considerable dynamics over the last decades, owing to
the changes in different domains including political, social, economic, demographic and
others. Different countries have emerged in different periods of time as emerging economies
across the international framework, showing impressive traits in the social, economic,
political and other aspects. Of this, the economic aspects of a country hold immense
importance and a lot of the welfare of the country as a whole and its population depends on
the economic prosperity and economic development of the country (Arena 2016).
In this context, although economic growth and economic development are often used for
indicating towards the same phenomenon of economic prosperity of a country, these two
terms however have different meanings and implications on the economy and on the country
as a whole (Mankiw, 2015). While the concept of economic growth indicates towards the rise
in the overall economic productivity of a country, with the increase in the value of the goods
and services produced in the country, which is mainly observed with the help of the growth
dynamics in the Gross Domestic Product of the concerned country, the concept of economic
development is a much broader concept. The economic development of a country indicates
towards the increase in the overall economic welfare, which in turn can be reflected in an
overall improved lifestyle and standard of living of the major share of the population of the
country.
Keeping this into consideration, the concerned report tries to analyse and discuss the growth
of the economy of one of the most significant and emerging countries in the global scenario
in the contemporary period, which is the economy of India. The country can be considered as
one of the primary developing economies in the contemporary period, showing huge
dynamics in all the significant growth and development indicators of the county. However,

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not all the dynamics are seen to be positive and some of the indicators are also seen to be
showing negative dynamics over the last few decades, which are discussed and interpreted in
the following section of the report.
Economic Development: Meaning and Implications
As discussed above, the notions of economic development is a much widespread and more
inclusive notion, in the general global framework, in which the not only the economic
productivity and monetary increase in the welfare of the country is taken into account, but
also the other aspects of the well-being of the population of the country, which apart from
economic aspects, also include the social, political and social well-being of the population of
the country (Coale and Hoover, 2015).
The concept of economic development came into existence, in the post war period of 1950s,
when it was observed that in many countries, in spite of robust economic growth and increase
in the productivity as well as GDP, the welfare of major share of the population of the
country cannot be seen to be increasing, especially in the aspects of education, health,
morbidity, employment, economic abundance and other socio-economic indictors, which in
turn led to the belief that increase in economic growth does not necessarily lead to
percolation of the fruits of the economic growth to all the sections of the society, which in
turn led to the acceptance of economic development as a better indicator of welfare of the
population of the concerned countries(Mankiw 2014)
To measure the economic development of the countries, over the years, many indices have
been developed of which the Human Development Index is one of the most significant,
comprehensive and widely used measurement for capturing the overall economic
developmental conditions of a country, in which the abstract concept of development is

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quantified on the basis of the following components of a well-developed and effective
lifespan:
a) Long and healthy life- This is taken into account in the concerned index by calculating the
life expectancy of the population of a country at birth.
b) Knowledge- The presence and increase in knowledge in the population of the country is
calculated by considering the indicators of the enrolment in the schools and the adult literacy
in the country.
c) Decent living standard- For well-being of the population, economic abundance in each of
their hands is also required. To measure the level of economic abundance and the level of
living of the population of the concerned country, the per-capita Gross National Product is
taken into consideration (Taussig 2013).
However, apart from the HDI and economic growth, there are many aspects of overall
economic development in a country, which include the level of equality in distribution, level
of poverty and other aspects, which are also required to be taken into account to get a
wholesome view of the overall performance of the economy of a country over the years.
India: Economic Overview
The mixed economy of India is one of the primary developing economies in the
contemporary global scenario, ranking sixth globally in terms of Nominal GDP in the
international framework and showing considerably impressive performance in the economic
growth perspectives (measured with the help of GDP and its growth dynamics) over the years
(Laibson and List 2015). Much of this can be attributed to the international phenomenon like
Globalization as well as the trade liberalisation of the country in 1991, post which the
industrial and commercial sector of the previously agriculture-based economy have grown
impressively. The country, in the contemporary period, has a flourishing service sector, a

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significant manufacturing sector, robust trade relations across all the major economies of the
globe and economic growth rates higher than many developed economies across the globe
(Rios, McConnell and Brue 2013).
Economic Growth of India over the years
The primary indicator of economic growth of a country, as can be seen from the above
discussion, is that of the Gross Domestic Product of the country. Keeping this into account,
the GDP dynamics of India for the last few decades can be seen to be as follows:
Figure 1: India’s GDP (1980-2017)
As is evident from the above figure, the GDP of the country has increased over the last few
decades, with the magnitude of increase rising considerably 1995, which in turn indicates
towards the point that the economy of the country is growing in terms of overall productivity
(Tyner 2012). The dynamics in the growth can be observed more effectively with the help of
the growth rate of the GDP of the country, which can be seen as follows:

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Figure 2: GDP Annual Growth Rate of India (1980-2017)
The growth rate of GDP, in spite of all the positive as well as negative implications, can be
seen to be showing a roughly positive trend, which explains the economic growth of the
country.
Figure 3: Percentage GDP Growth of India, China and World
From the above figure, it can be seen that the percentage GDP growth of India is
impressively higher than that of the Global GDP and can also be seen to be surpassing that of

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China in the contemporary period, which in turn, implies that the economy of the country has
been growing impressively over the last few decades.
Economic Development of India
The above statistics shown above, however, cannot considerably highlight the overall
economic development scenarios of the country, as there are many other factors present in the
economy, which influence the overall development of the same.
The index of GDP and its growth shows the overall economic productivity increase in the
country and does not however take into account the distribution of the same to the population
of the concerned country, for which the per-capita income of the residents of the country
needs to be considered (Mankiw 2014). Keeping this into consideration, the per-capita
income of the population of India, over the years. can be seen to be as follows:
Figure 4: Per-Capita GNI of India over the last few decades
The per-capita Gross National Income, which is an indicator of the income of the population
of the country in general, can be seen to be developing steadily for the concerned country,
over the last few decades, which in turn indicates towards the increasing economic welfare of

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the country in the broad framework. This increase in the per-head income in the concerned
country can be due to the fall in the rate of growth of population in the country in the recent
years, which can be seen from the following figure:
Figure 5: Growth rate of population in India over the years
The considerably falling population growth in the country, as can be seen from the above
figure, can be considered to be a contributing factor towards the increase in the economic
wellbeing of the population of the country and is also an indication regarding the positive
developments of the country (Heijdra 2017).
Human Development Index of India over the years
Although it has not been possible to have quantitative measurement of development of
human, the UNDP (United Nations Development program) has developed composite index
HDI ( Human Development Index). The HDI, as discussed above, being one of the primary
indicators of the overall economic development of India, can be seen as follows:

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Figure 6: Human Development Index of India over the last few decades
As is evident from the above figure, the HDI of the country has been rising from 1990, with
the rates of increase being higher in the initial periods than that of the recent periods (Palazzi,
and Lauri 2013). The three major components of HDI includes-
 Longevity- This component provides a measurement about how many years a person
can live in the nation. However, it is the choice of living healthy life or long life
(Heijdra 2017).
 Standard of living- It indicates GNI (Gross nation income) per capita which means
how much of total income an individual is earning on an average in the nation.
 Knowledge or Education- It is the choice of acquiring literacy, information and
education. It is estimated as the percentage of literate to the total population.
In the present years, few other factors have also been considered in estimating HDI,
inequality adjustment, gender development. In India, there has been three indicators that
estimates HDI. Among these, a set of composite indices mainly presents human development
state for the community as whole. Several other indicators have also added to these indicators
including- infant mortality, life expectancy at birth and so on.

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Inequality in India
India has been considered as the second most unequal nation across the globe as recorded in
the year 2016 (Arena 2016) The inequality in income distribution in India has occurred due to
various reasons, which involves-
Unemployment- This is one of the major factor that causes low income level of the Indian
residents. Apart from this, underemployment also causes inequality in this nation. In fact, low
productivity of labor also causes poverty as well as inequality among the people.
Tax Evasion-The rate of personal income tax is high in India. High rate of tax motivates
evasion and hence leads to parallel economy. This in turn leads to inequality in come of
people (Heijdra 2017).
Inflation- This is another cause of inequality in India as some profit earners have gained and
few loses during the inflation. As the money income enhances and real income declines, the
standard of living of the Indians automatically decreases.
Regressive Tax- The indirect taxes provides maximum revenue to Indian government. Since
they are regressive in nature, it creates inequality in this nation.
Poverty in India
In the present years, it has been estimated that near about 28.5% of the population in India
lives below the line of poverty (Arena 2016). In India, household expenditure has been
considered to estimate poverty count. Mainly the tribal people and the labor class are
considered as poor in India. In the recent years, this nation has been estimated as the highest
share of poor across the globe. High growth of population and increasing prices of products
are one of the causes of poverty in India.

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References
Arena, R., 2016. The economics of Alfred Marshall: revisiting Marshall's legacy. Springer.
Coale, A.J. and Hoover, E.M., 2015. Population growth and economic development.
Princeton University Press.
Heijdra, B.J., 2017. Foundations of modern macroeconomics. Oxford university press.
Laibson, D. and List, J.A., 2015. Principles of (behavioral) economics. American Economic
Review, 105(5), pp.385-90.
Libby, J.D., 2017. Principles of Macroeconomics.
Mankiw, N.G., 2015. Ten principles of economics. Principles of Economics, pp.3-18.
Mankiw, N.G., 2014. Principles of macroeconomics. Cengage Learning.
Mankiw, N.G., 2014. Essentials of economics. Cengage learning.
Palazzi, P. and Lauri, A., 2013. The human development index: Suggested corrections. PSL
Quarterly Review, 51(205).
Rios, M.C., McConnell, C.R. and Brue, S.L., 2013. Economics: Principles, problems, and
policies. McGraw-Hill.

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Taussig, F.W., 2013. Principles of economics (Vol. 2). Cosimo, Inc..
Tyner, W.E., 2012. Energy resources and economic development in India. Springer Science
& Business Media.