There have been many instances throughout the Indian history where the leadership had to face plenty of challenges, but they were able to rise above all these hurdles to create economic growth. Independence brought new aspects as far as economic policies were concerned and this led to a marked improvement in the condition of the economy. Even today, India is known for its economic growth and this has become quite apparent during the past few decades. Independence led to economic liberalization and changes which have greatly benefited the economy of India.
There have been many ups and downs during the course of economic development in India since independence. The first decade after independence was known for inflation, which was quite high. The inflation ate away at the value of the currency and this caused problems for the common man. However, with the introduction of the formal system of currency exchange in the 1950s, the inflation went down and the value of the Rupee rose. With the liberalization of the economy, foreign trade became more open and this in turn helped to bring about an increase in the industrial production rate. Today, India is known for its phenomenal growth and this is due to the liberalization policy implemented by the Indian government.
Growth in India has depended largely on foreign direct investment (FDI). Since the economy was not well developed before independence, foreign investors had to invest a lot of money in the Indian market in order to develop it. Today, India is recognized for its growth and prosperity in the global economy and so foreign investors have turned to invest money in the country. Thus, the growth of the economy has come through FDI.
There have also been some major fluctuations in the economy during the course of economic development in India since independence. During the time of Emergency, inflation became a problem. The market was flooded with foreign currencies and this forced the government to devalue the Rupee. This resulted in inflation. However, with the liberalization policies followed by the Indian government, foreign currencies are allowed to enter the economy and inflation has come down considerably.
There have also been instances when the Indian currency strengthened against the dollar, against the Euro and against the British pound. This again resulted in an increase in industrial production. Inflation was also reduced as the economy became more competitive. Today, the Rupee is valued very highly against the other currencies and this explains the high level of economic growth in India.
There have been some instances when the economy showed an upsurge but then quickly declined once the domestic economy recovered and the demand for the currency de appreciated against the dollar. This led to depreciation of the Rupee and this again resulted in an upsurge in the foreign exchange market. However, a considerable decline was observed in the manufacturing sector. This led to a recession in the economy of India and so the economic growth came down.
The economy of India has definitely seen ups and downs, but after independence the economy has been on a constant uptrend. The government has always kept the economy on a healthy track, because the main motive . . . . . . of the policy makers in the Indian government is to see that the economy grows at a rapid rate. This is possible only if there is a constant inflow of foreign investment capital. This inflow can only be guaranteed if the Rupee remains strong. The external financing crisis that occurred at the time of independence has led to the weakening of the Rupee and this has led to the upsurge in the foreign investment in the economy.
So, we can say that the Rupee is a leading hand in determining the economic growth in India since Independence. External funding, foreign trade and the level of competitiveness are all affected by the strength of the Rupee. There are several factors affecting the currency price and the strength of the Rupee, which we will discuss later on in this article. But for now let us look at the positive aspects of the Rupee.