CA Foundation – June 2024

(New Syllabus)

Business Economics
Chapter 10
Indian Economy

By CA Mohnish Vora (MVSIR)

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10.1 STATUS OF INDIAN ECONOMY: PRE INDEPENDENCE PERIOD (1850 -1947)

➢ Between the first & seventeenth century AD, India is believed to have had the largest
economy of the ancient and the medieval world. It was prosperous and self-reliant and is
believed to have controlled between one third and one fourth of the world's wealth.

➢ Though agriculture was dominant occupation, but main source of livelihood for majority of
people, the country had a highly skilled set of artisans and craftsmen who produced
manufactures, handicrafts and textiles of superior quality for worldwide market.

Ancient Economic Philosophy of India

➢ The earliest known treatise on ancient Indian economic philosophy is ‘Arthashastra’ by

Kautilya (Chanakya) (321–296 BCE).
➢ Arthashastra is recognized as one of the most important works on statecraft in the
genre of political philosophy.
➢ It was a handbook for King Chandragupta Maurya, the founder of Mauryan empire,
containing directives as to how to reign over the kingdom and encouraging direct action in
addressing political concerns without regard for ethical considerations.
➢ Artha is not wealth alone; rather it encompasses all aspects of the material well-being of
individuals. Arthashastra is the science of ‘artha’ or material prosperity, or “the means of
subsistence of humanity,” which is, primarily, ‘wealth’ and, secondarily, ‘the land’.

➢ The major focus of the work is on the means of fruitfully maintaining and using land.
➢ Kautilya emphasized on robust agricultural initiatives for an abundant harvest which will
go toward filling the state's treasury. Taxes, which were charged equal for private and
state-owned businesses, must be fair to all and should be easily understood.

➢ True kingship is defined as a ruler's subordination of his own desires and ambitions to the
good of his people; i.e. a king's policies should reflect a concern for the greatest good of the
greatest number of his subjects.

➢ The preservation and advancement of this good was comprised of seven vital elements,
namely the King, Ministers, Farmlands, Fortresses, Treasury, Military and the Allies.

Period of British Rule

➢ The period of British rule can be divided into two sub periods:
❑ The rule of East India Company from 1757 to 1858
❑ British government in India from 1858 to 1947

➢ Industrial revolution in Britain in latter half of 18th century → there arose need of raw
material supply & also need for finding markets for finished goods→ led to change in
nature of India’s foreign trade from exporter of manufactures to exporter of raw materials

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➢ The Indian exports of finished goods were subjected to heavy tariffs and the imports
were charged lower tariffs under the policy of discriminatory tariffs followed by the
British. This made the exports of finished goods relatively costlier and the imports cheaper.
In this backdrop, the Indian goods lost their competitiveness.

➢ Consequently, the external as well as the domestic demand for indigenous products fell
sharply culminating in the destruction of Indian handicrafts and manufactures.

➢ The destruction of Indian manufactures, mainly due to the hostile imperial policies to serve
the British interests and the competition from machine-made goods, had far reaching
adverse consequences on the Indian manufacturing sector.

➢ The problem was aggravated by the shift in patterns of demand by domestic consumers
favouring foreign goods as many Indians wanted to affiliate themselves with western
culture and ways of life.

Stagnated Nature of Industrialisation During the Colonial Era

➢ The cotton mill industry in India had 9 million spindles in the 1930s, which placed India in
the 5th position globally in terms of number of spindles.

➢ Jute mills expanded rapidly in Calcutta → global demand for ropes. At the end of the 19th
century, Indian jute mill industry was → largest in world in terms of the amount of raw
jute consumed in production.

➢ Heavy industries like iron industry were established in 1814 by British capital.
➢ India’s iron industry was ranked 8th in the world in terms of output in 1930.

➢ Just before the Great Depression, India was ranked as the 12th largest industrialised country
measured by the value of manufactured products.

➢ The producer goods industries→ did not show expansion → because of pressure exerted by
the English producers to discourage development of industries in India which were likely
to compete with them.

➢ The share in Net Domestic Product (NDP) of manufacturing sector → 7% in 1946.

Indian Economy: Post-independence (1947- 1991)

➢ At time of independence, India had a literacy rate just above 18 percent & 32 years of life
expectancy in 1951. India’s poverty was in terms of income & human capital.

➢ Nehruvian model which supported social & economic redistribution and industrialization
directed by the state came to dominate the post-Independence Indian economic policy.

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➢ Planning Commission of India was established in 1950 → to plan for economic development
of nation in line with the socialistic strategy → through five-year plans (First FYP- 1951)

➢ Rapid industrialization of economy was cornerstone of Nehru’s development strategy.

➢ The concept of ‘planned modernization’ meant a systematic planning to support
industrialization. (bureaucrats and technocrats)

Industrial Policy Resolution

➢ The Industrial Policy Resolution (1948) → expanded role of public sector & licensing to the
private sector. It granted state (govt.) monopoly for strategic areas such as-
➢ atomic energy,
➢ arms and ammunition, &
➢ railways.
Also, rights to new investments in basic Industries were exclusively given to state.

➢ The policies in 1950’s were guided by two economic philosophies:

1. Nehru’s visualization to build a socialistic society with emphasis on heavy industry, and
2. The Gandhian philosophy of small scale and cottage industry and village republics

➢ The Industrial Policy Resolution of 1956 → provided a framework for industrial

development, but was lopsided as it supported enormous expansion of scope of public
sector. (lead to dampening of private sector initiatives)

➢ India followed an open foreign investment policy and a relatively open trade policy until
the late 1950s. A balance of payments crisis emerged in 1958 causing concerns regarding
foreign exchange depletion. Consequently, it lead to gradual tightening of trade and
reduction in investment-licensing of new investments requiring imports of capital goods.
These import controls were maintained until 1966.

➢ In the first three decades after independence (1950–80), India’s average annual rate of
growth of GDP- ‘Hindu growth rate’- was 3.5 %.

Agriculture Issues & Green Revolution

➢ Strategy for agricultural development till mid 1960s was reliance on institutional model i.e.
land reforms, farm cooperatives etc. and no importance given to technocratic areas like
R&D , irrigation etc.

➢ With continuous failures of monsoon, two severe droughts struck India in 1966 & 1967.

➢ The agricultural sector recorded substantial negative growth and India faced a serious food
problem. India had to depend on the United States for food aid under PL 480.

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➢ Restructuring of agricultural policy → ‘green revolution’ was initiated soon → which was
materialised by-
➢ innovative farm technologies, including high yielding seed varieties &
➢ intensive use of water, fertilizer and pesticides

➢ Restructuring of agricultural policy → ‘green revolution’ was initiated soon → which was
materialised by-
➢ innovative farm technologies, including high yielding seed varieties &
➢ intensive use of water, fertilizer and pesticides

Nationalisation of Banks

➢ The government nationalized-

✓ 14 banks in 1969 and
✓ then followed it up with nationalizing another 6 in 1980.

Indian Economy - Worst Performance

➢ The economic performance during “1965-81” is the worst in independent India’s history.
➢ This happened due to-
✓ decline in productivity.
✓ license-raj,
✓ the autarchic policies that dominated the 1960s and 1970s,
✓ external shocks such as three wars (in 1962, 1965, and 1971),
✓ major droughts (in 1966 and 1967), and
✓ oil shocks of 1973 and 1979.

Monopolies and Restrictive Trade Practices (MRTP) Act, 1969

➢ The MRTP Act, 1969 was aimed at regulation of large firms which had relatively large
market power. Several restrictions were placed on them in terms of licensing, capacity
addition, mergers and acquisitions.
➢ Thus, policies restricting the possibility of expansion of big business houses kept their entry
away from nearly all but a few highly capital intensive sectors.

Reservation for Small Scale Sector

➢ In 1967, many products were reserved for exclusive manufacture by the small scale sector

➢ It was thought that this policy will encourage labour-intensive economic growth & allow
redistribution of income.

➢ However, this policy excluded all big firms from labour intensive industries and India was
not able to compete in the world market for these products. Stringent labour laws also
discouraged labour intensive industries.

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The Era of Reforms

➢ The initiatives, spanning 1981 to 1989, were referred to as ‘early liberalization’ which
aimed at changing prevailing thrust on ‘inward-oriented’ trade and investment practices.
➢ This liberalization is often referred to as ‘reforms by stealth’ to denote its ad-hoc & not
widely publicized nature.

➢ The average annual growth rate of GDP during-

➢ sixth plan period (1980–1985) was 5.7 % and
➢ seventh plan period (1985–1990) was 5.8 %

➢ The early reforms of 1980’s covered three areas- industry, trade and taxation.

❑ The prominent industrial policy initiatives during this period directed towards removing
constraints on growth were:
✓ In 1985 delicensing of 25 broad categories of industries was done.
✓ The facility of ‘broad-banding’ was accorded for industry groups to allow flexibility and
rapid changes in their product mix without going in for fresh licensing.
✓ The asset limit above which firms were subject to MRTP regulations was raised from 20
crore to 100 crore.
✓ The multipoint excise duties was converted into a modified value-added (MODVAT) tax
which reduced taxation on inputs.
✓ Establishment of the Securities and Exchange Board of India (SEBI) in April 12, 1988
✓ The open general licence (OGL) list was expanded & the number of capital goods items
reached 1,329 in April 1990.
✓ Several export incentives were introduced and expanded
✓ Exchange rate was set at a level → to expand exports & reduced pressure on foreign
exchange needed for imports
✓ Price and distribution controls on cement and aluminum were entirely abolished.
✓ Based on the real effective exchange rate (REER), the rupee was depreciated by about
30.0 per cent from 1985–86 to 1989–90.
✓ The budget for 1986 introduced policies of-
❖ cutting taxes further,
❖ liberalising imports &
❖ reducing tariffs.

➢ Thus, liberalization in the 1980s served as necessary foundation for the more universal and
organized reforms of the 1990s.

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The Economic Reforms of 1991

➢ The economic reforms in 1991 under the Narsimha Rao government.

➢ The causes attributed to the immediate need for such a drastic change are:
1) Large fiscal deficit (financed by huge debt), & adverse balance of payments.
2) Persistent huge deficits → swelling public debt → govt revenues used for interest
pay.
3) Surge in oil prices (due to gulf war in 1990) & thus strain on a balance of payments.
4) The foreign exchange reserves touched lowest point → only $1.2 billion → sufficient
for only two weeks of imports.
5) Tightening of import restrictions to collect forex for essential imports resulted in
reduction in industrial output.
6) India had to depend on external borrowing from International Monetary Fund
which in turn puts stringent conditions.
7) Fragile political situation along with economic crises → led to ‘crisis of confidence’.

➢ 1991 reforms→ known as LPG- Liberalization, Privatization and Globalisation, had two
major objectives:
1) reorientation of the economy from a centrally directed and highly controlled one
to a ‘market friendly’ or market oriented economy.
2) macroeconomic stabilization by substantial reduction in fiscal deficit.

➢ The policies can be broadly classified as:

1) stabilization measures → short term measures → for problems of inflation & adverse
balance of payment, &
2) structural reform measures → long term → aimed at bringing in productivity &
competitiveness by removing structural rigidities in different sectors of economy.

The Economic Reforms of 1991

➢ Bringing in fiscal discipline by reducing the fiscal deficit was vital because-
✓ excess domestic demand,
✓ surge in imports and
✓ widening of the current account deficit (CAD)
This was attempted by measures to increase govt revenues & curtail govt exp.

➢ Measures to this effect included:

1) Introduction of a stable and transparent tax structure,
2) Ensuring better tax compliance,
3) Thrust on curbing government expenditure
4) Reduction in subsidies and abolition of unnecessary subsidies
5) Disinvestment of part of govt’s equity holdings in select PSUs &
6) Encouraging private sector participation.

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Monetary & Financial Sector Reforms

➢ The focus was mostly on-

➢ reducing the burden of NPAs on government banks,
➢ introducing and sustaining competition, and
➢ deregulating interest rates.

➢ These included many measures, important among them are:

1) Interest rate liberalization & reduction in controls on banks by RBI in respect of interest
rates.
2) Opening of new private sector banks & facilitating competition among public, private
sector and foreign banks and removal of administrative constraints.
3) Reduction in reserve requirements namely, SLR & CRR, in line with recommendations of
the Narasimham Committee Report, 1991.
4) Liberalisation of bank branch licensing policy and granting of freedom to banks in respect
of opening, relocating or closure of branches
5) Prudential norms of accounting in respect of classification of assets, disclosure of income
and provisions for bad debt, to ensure books of banks reflect truthful financial position.

Reforms in Capital Markets

➢ SEBI which was set up in 1988 was given statutory recognition in 1992.
➢ It is an independent regulator of the capital market → creates a transparent environment
which would facilitate mobilization of adequate resources and their efficient allocation.

The ‘New Industrial Policy’

➢ The ‘New Industrial Policy’ was announced on 24 July 1991 → substantially deregulate
industry to promote growth of a more efficient and competitive industrial economy.

➢ To facilitate domestic industry, a series of reforms were introduced-

1. Ended ‘License Raj’ by removing licensing restrictions industries except for 18, later
reduced to 5, namely-
1) arms and ammunition,
2) atomic substances,
3) narcotic drugs and
4) hazardous chemicals,
5) distillation and brewing of alcoholic drinks and cigarettes and cigars
as these have severe implications on health, safety, and environment.

2. Public sector was limited to eight sectors based on security and strategic grounds.
Subsequently only two items remained – railway transport and atomic energy

3. MRTP Act was restructured and the provisions relating to merger, amalgamation, and
takeover were repealed. This has eliminated the need for pre-entry scrutiny of

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investment decisions and prior approval for large companies for capacity expansion or
diversification.

4) Products reserved for small-scale industries → dereserved enabling entry of large scale ind

5) The policy ended the public sector monopoly in many sectors. Now industries reserved for
public sector are only a part of atomic energy generation and railway transport.

6) Foreign investment → liberalized → concept of automatic approval was introduced. FDI is

prohibited only in four sectors viz. retail trade, atomic energy, lottery business & betting
and gambling.

7) External trade was further liberalised by substituting ‘the positive list approach’ of
listing license-free items on the OGL list with the negative list approach.

8) In 1990-91, the highest tariff rate was 355%. The top tariff rate was brought down to
10% in 2007-08, with some exceptions such as automobile at 100%

9) Rupee was devalued by 18% against the dollar.

10) Disinvestment of government holdings of equity in PSUs. PSUs were provided with
greater autonomy in decision making and opportunity for professional management. The
budgetary support to public sector was progressively reduced.

NITI AAYOG: A bold step for transforming India

➢ Planning Commission was abolished in 2014→ & on 1st Jan 2015 it was replaced by the
National Institution for Transforming India (NITI) Aayog.

➢ The major objective of such a move was to-

✓ ‘spur innovative thinking by objective ‘experts’, &
✓ promote ‘co-operative federalism’ by enhancing the voice & influence of states’.

➢ NITI Aayog is expected to serve as a 'Think Tank' of the government & a ‘directional and
policy dynamo’.

➢ The key initiatives of NITI Aayog are:

1. ‘LiFE’ which envisions replacing the prevalent 'use-and-dispose' economy
2. National Data and Analytics Platform (NDAP) facilitates and improves access to Indian
government data
3. Shoonya campaign aims to improve air quality in India by accelerating the deployment of
electric vehicles
4. E-Amrit is a one-stop destination for all information on electric vehicles

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5. India Policy Insights (IPI)

6. 'Methanol Economy' programme → for reducing India's oil import bill, greenhouse gas
emissions, & converting coal reserves and municipal solid waste into methanol, and
7. 'Transforming India’s Gold Market’ → recommend measures for tapping into the potential
of the sector and provide a stimulus to exports and economic growth.

❑ Shortcomings of NITI Aayog

➢ NITI has a limited role→ does not produce national plans, control expenditures, or review
state plans.
➢ It is excluded from the budgeting process.
➢ It lacks autonomy & balance of power within policy making apparatus of central govt.
➢ The termination of Planning Commission → strengthened Ministry of Finance, with its
‘fixation of macroeconomic stability & natural instinct to limit expenditure’.
➢ It lacks the independence & power to perform as a ‘counterweight’ to act as a "voice of
development" concerned with inequities.

The Current State of the Indian Economy: A brief overview

I) The Primary Sector

➢ Agriculture, with its allied sectors, is the largest source of livelihood in India.

➢ India has emerged as-

✓ world’s largest producer of milk, pulses, jute and spices.
✓ largest area planted under wheat, rice and cotton.
✓ 2nd largest producer of fruits, vegetables, tea, farmed fish, cotton, sugarcane, wheat,
rice, cotton, and sugar.
✓ world’s 6th largest food and grocery market is the
✓ world’s largest cattle herd (buffaloes).

➢ 47% of India’s population is directly dependent on agriculture for living. It contributed

18.80% to the Gross Domestic Product (GDP).

➢ Food grains production has reached 315.7 million tonnes in 2021-22.

➢ Private investment in agriculture has increased to 9.3% in 2020-21.

➢ Agri sector had a growth of 3.50% in 2022-23, driven by buoyant rabi sowing
➢ Export of agricultural → touched an all-time peak of Rs 3,74,611 crore during last one year,
& it rose by 25 percent within 6 months of current financial year 2022-23 (Apr-Sep)

➢ Agricultural and Processed Food Export Development Authority (APEDA) is entrusted with
the responsibility of export promotion of agri-products.

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A large number of measures were undertaken by government to improve agri. sector-

1) Allowing 100% FDI in marketing of food products and in food product E-commerce under
the automatic route
2) Income support to farmers through PM KISAN
3) Fixing of Minimum Support Price (MSP) at 1.50 times the cost of production
4) Institutional credit for agriculture sector at concessional rates
5) Launch of the National Mission for Edible Oils
6) Pradhan Mantri Fasal Bima Yojana (PMFBY) – a novel insurance scheme for financial
support to farmers suffering crop loss/damage
7) Mission for Integrated Development of Horticulture (MIDH) for the holistic growth of the
horticulture sector
8) Provision of Soil Health Cards
9) Paramparagat Krishi Vikas Yojana (PKVY) supporting and promoting organic farming, and
improvement of soil health.
10) Agri Infrastructure Fund, a medium / long term debt financing facility for investment in
viable projects for post-harvest management Infrastructure and community farming
assets
11) Promotion of Farmer Producer Organisations (FPOs) to ensure better income for the
producers through an organization of their own.
12) Per Drop More Crop (PDMC) scheme to increase water use efficiency at the farm level
13) Setting up of Micro Irrigation Fund
14) Initiatives towards agricultural mechanization
15) Setting up of E-NAM -a pan-India electronic trading portal which networks the existing
APMC mandis to create a unified national market for agricultural commodities.
16) Introduction of Kisan Rail for improvement in farm produce logistics, and
17) Creation of a Start-up Eco system in agriculture and allied sectors

II) The Secondary Sector

➢ Secondary sector contributes 30% of total gross value added in the country and employing
over 12.1 crores of people.
➢ The industrial sector in India broadly comprises of- manufacturing, heavy industries,
fertilizers, pharmaceuticals, chemicals and petrochemicals, oil and natural gas, food
processing, mining, defence products, textiles, retail, micro, small & medium enterprises,
cottage industries and tourism.

➢ The share of informal sector in the economy is more than 50% of GVA.

➢ Manufacturing sector accounts for 78% of total production.

➢ In Jan 31, 2023 the Manufacturing Purchasing Managers’ Index (PMI) in India stood at 55.4.
India’s rank in the Global Innovation Index (GII) improved to 40th in 2022 from 81st in 2015.

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➢ Department for Promotion of Industry and Internal Trade (DPIIT) has a role in formulation
and implementation of industrial policy and strategies for industrial development.

➢ Some of the policies are presented below:

1) Introduction of GST on 1 July 2017 as single indirect tax replacing many indirect taxes.
2) Reduction of corporate tax to domestic comp. giving an option to pay income-tax at 22%
3) ‘Make in India’ is a 'Vocal for Local' initiative launched in 2014 to- facilitate investment,
innovation, infrastructure in India.
4) ‘Ease of Doing Business’ → simplification of procedures, rationalization of legal provisions,
digitization of government processes, and decriminalization of minor defaults. India
ranks 63rd in the World Bank’s annual Doing Business Report (DBR), 2020
5) The National Single Window System is a one-stop-shop for investor related approvals &
provide continuous facilitation and support to investors.
6) PM Gati Shakti National Master Plan to facilitate data-based decisions related to
integrated planning of multi-modal infrastructure, thereby reducing logistics cost.
7) National Logistics Policy (NLP)→ aims to lower cost of logistics
8) To become ‘Atmanirbhar’, the Production Linked Incentive (PLI) Scheme was initiated for
14 key sectors to enhance India’s manufacturing capabilities and export competitiveness.
9) Industrial Corridor Development Programme: Greenfield Industrial regions with sustainable
infrastructure and to make available ‘plug and play’ infrastructure at the plot level.
10) FAME-India Scheme (Faster Adoption and Manufacturing of Hybrid and Electric Vehicles) to
promote manufacturing of electric and hybrid vehicle technology
11) ‘Udyami Bharat’ → empowerment of Micro Small and Medium Enterprises (MSMEs).
12) PM Mega Integrated Textile Region and Apparel (PM MITRA): ensure world-class industrial
infrastructure & boost FDI and local investment in the textiles sector.
13) Opening up for global investments: Make India a more attractive investment destination
14) 100 per cent FDI under automatic route is permitted for the sale of coal, and coal mining
activities, & insurance intermediaries.
15) Foreign Investment Promotion Board (FIPB) was abolished in May 2017, and replaced by
Foreign Investment Facilitation Portal (FIFP). Under FIFP, process for granting FDI approvals
has been simplified. FDI has increased jumped by 39% since FIFP came.
16) Remission of Duties and Taxes on Export Products (RoDTEP) 2021 formed to replace the
existing MEIS (Merchandise Exports from India Scheme) to boost exports. It provides for
rebate of all hidden central, state, and local duties/taxes/levies on goods exported
17) Start-up India Programme → facilitator for ideas & innovation in the country. India’s rank
in the Global Innovation Index (GII) → 40th in 2022.
18) Public Procurement (Preference to Make in India) Order, 2017 gives preference to locally
manufactured goods/serv. in public procurement thereby giving boost to industrial growth.
19) Emergency Credit Line Guarantee Scheme (ECLGS) is a fully guaranteed emergency credit
line to monitor lending institutions.
➢ India is gearing up for 4th industrial revolution or Industry 4.0 in which focus will be on- cloud
computing, IoT, machine learning, & artificial intelligence (AI).
➢ The National Manufacturing Policy which aims to increase the share of manufacturing in GDP to
25% by 2025 is a step in this direction.
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III) The Tertiary Sector

➢ Unlike the usual economic development process of nations where economic growth has
led to a shift from- agriculture to industries,
India has unique experience of bypassing the secondary sector in the growth trajectory
by a shift from agriculture to services sector.

The broad classification of services as per the National Industrial Classification, 2008

1. Wholesale and retail trade and repair of vehicles

2. Transportation and storage

3. Accommodation and food service activities

4. Information and communication

5. Financial and insurance activities

6. Real estate activities

7. Professional, scientific and technical activities

8. Administrative and support services

9. Public administration, defence and compulsory social security

10. Education

11. Human health and social work activities

12. Arts, entertainments and recreation

13. Other service activities

14. Activities of households as employers, undifferentiated goods and services producing

activities of households for own use

15. Activities of extra territorial organizations and bodies

➢ The service sector refers to industry producing intangible goods viz. services as output.

➢ The services sector is the largest sector of India & accounts for 53.89% of total India's GVA.
Gross Value Added (GVA) of services sector is estimated at ₹ 96.54 lakh crore in 2020-21.

➢ The service sector is the fastest growing sector in India and has the highest labour
productivity. The exceptionally rapid expansion of knowledge-based services such as
professional and technical services has been responsible for the faster growth of the
services sector.

➢ The start-ups which have grown remarkably over the last few years mostly belong to the
services sector.

➢ India is among top 10 WTO members in service exports and imports.

➢ India’s services exports at US$ 27.0 billion recorded robust growth in November 2022 due
to software, business, and travel services.

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➢ While exports from all other sectors were adversely affected, India’s services exports
remained resilient during the Covid-19 pandemic. The reasons are the higher demand for
digital support and need for digital infrastructure modernization.

➢ Services sector is largest recipient of FDI inflows. FDI equity inflows into the services
sector accounted for more than 60 per cent of the total FDI equity inflows into India.

➢ The World Investment Report 2022 of UNCTAD places India as 7th largest recipient of FDI in
the top 20 host countries in 2021.

➢ In 2021-22, India received the highest-ever FDI inflows of US$ 84.8 billion including US$ 7.1
billion FDI equity inflows in the services sector.

➢ To ensure liberalisation, government permitted 100% foreign participation in

telecommunication services through Automatic Route.

➢ The FDI ceiling in insurance companies was also raised from 49 to 74%.

➢ Measures undertaken by the Government, such as the launch of the National Single-
Window system and enhancement in the FDI ceiling through the automatic route, have
played a significant role in facilitating investment.

Conclusion

➢ The India Development Update (IDU) of the World Bank published in November 2022,
observes that India had to face an unusually challenging external environment-
➢ Russia-Ukraine war,
➢ increased crude oil and commodity prices,
➢ persistent global supply disruptions,
➢ tighter financial conditions and
➢ high domestic inflationary pressures.

➢ Despite all these, the real GDP of India grew by 6.3 percent in July-September of 2022-23
driven by strong private consumption and investment.

➢ The report observes that India’s economy is relatively more insulated from global spillovers
than other emerging markets

➢ As such, compared to other emerging economies, India is much more resilient to withstand
adversities in the global arena.

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