India has come a long way from the country the British exited in 1947, and since evolved into a vibrant constitutional democracy and made rapid strides in several domains. What used to be a poor, slow‐growing country now has the third‐largest gross domestic product (GDP) in the world with regard to purchasing power parity and is projected to be the fastest‐growing major economy in the world. This short history of the Indian Economy since 1947 gives you a glimpse into the making India a 5 trillion economy.
Other timelines: • Indian Politics Timeline • Indian Geography Timeline
Decade I (1947-1960) - Socialist Economy
Nov 1947 – India’s first finance minister, R.K. Shanmukham Chetty presented first union budget in parliament. Start of Licence Raj after first government decide to have a planned economy where all aspects of the economy are controlled by the state and licences are given to a select few.
Jan 1949 - Reserve Bank of India (RBI) nationalized
Sep 1949 - Rupee devalued for the first time by 30.5 % as a defensive measure consequent to the devaluation by other 'sterling area' countries
Mar 1950 - India set up the Planning Commission in 1950 to oversee the entire range of planning, including resource allocation, implementation and appraisal of five-year plans
July 1955 - Imperial Bank of India converted to a state owned institution, State Bank of India (SBI) on July 1, 1955.
April 1956 - India adopted Industrial Policy Resolution of 1956 (long considered the economic constitution of India). According to this resolution, the objective of the social and economic policy in India was the establishment of a socialistic pattern of society. It provided more powers to the governmental machinery. It also categorized industries into three groups. Industries of basic and strategic importance were to be exclusively in the public sector. The second group comprised industries that were to be incrementally state-owned. The third, comprising mostly consumer industries, was left for the private sector. The private sector, however, was kept on a tight leash through a system of licences.
Sep 1956 - Life Insurance Corporation (LIC), biggest and most powerful financial institution in India, founded on September 1, 1956, when the Parliament of India passed the Life Insurance of India Act that nationalized the insurance industry in India. Over 245 insurance companies and provident societies were merged to create the state-owned Life Insurance Corporation of India.
Jun 1957 –Life Insurance Corporation had bought fraudulent stock worth ₹1.24 crore in —the largest investment the public-sector entity had made in its short history—in six companies owned by Kolkata-based Haridas Mundhra, without mandatory consultation with its investment committee. India’s finance minister T. T. Krishnamachari had to resign from his post over this first big financial scandal of free India.
1959 - State Bank of India (Subsidiary Banks) Act, 1959 made the banks of the erstwhile Princely Sates of India the subsidiaries of the State Bank of India. These were The Bank of Bikaner, The Bank of Jaipur, The Bank of Indore. The Bank of Mysore, The Bank of Patiala, The Bank of Hyderabad, The Bank of Saurashtra and The Bank of Travancore were made subsidiaries of The State Bank of India.
Decade II (1961 - 1970) - Green and White Revolution
1965 - The Green Revolution in India refers to a period when Indian agriculture was converted into an industrial system due to the adoption of modern methods and technology such as the use of high yielding variety (HYV) seeds, tractors, irrigation facilities, pesticides, and fertilizers. It was mainly found by M.S. Swaminathan.
Jun 1966 - On 6 June 1966, Indira Gandhi took the drastic step of devaluing the Indian rupee by a sharp 57%. The rupee fell to 7.50 per US dollar from 4.76.
July 1969 - Nationalization of 14 private banks. The main aim of the move was to accelerate bank lending to agriculture at a time when big businesses cornered large chunks of the credit flow.
1970 - The White Revolution, known as Operation Flood, led by Verghese Kurien was launched in 1970. It transformed India from a milk deficient nation into the world's largest milk producers. Self-sufficiency in the dairy sector was achieved entirely through the cooperative movement, which has spread to more than 12 million dairy farmers across the country. Decades later, Amul, the brand started by cooperative farmers in Anand, remains a market leader.
Decade III (1971 - 1980) - Emergency
Jan 1971 - Then Prime Minister Indira Gandhi argued the case for abolition based on equal rights for all citizens and the need to reduce the government's revenue deficit. Privy Purse was a form of payment made to the royal families of all erstwhile princely states as it was made a part of their agreement in order to integrate with India in 1947, and later to merge their states in 1949, whereby they lost all ruling rights.
Oct 1973 - "Oil Shock" when oil prices quadrupled. This led to double digit inflation as well as global recession.
Jan 1978 - First Demonetization in India. Prime Minister Morarji Desai withdrew the legal-tender status of ₹1,000, ₹5,000 and ₹10,000 banknotes in a crackdown on illicit wealth.
Nov 1977 - Exist of IBM and Coca Cola from India as they did not comply with the Foreign Exchange Regulation Act that mandated foreign investors cannot own over 40% in Indian enterprises. The two multinationals shut their India operations.
Decade IV (1981 - 1990)
July 1982 - National Bank for Agriculture and Rural Development (NABARD) established for the promotion of agriculture, small scale industries, and other rural crafts for promoting integrated rural development and securing rural prosperity
1986 - Bofors Scandal - India signed a deal worth Rs 1437 crore (approx) with the Swedish arms manufacturer Bofors AB, to supply their 155mm field howitzer to the Indian Army. Many politicians including the then PM Rajiv Gandhi were accused of receiving bribes or “kickbacks” worth over Rs. 64 crores for the deal.
Apr 1988 - Security & Exchange Board of India (SEBI) established to deal with the development and regulation of the securities market and investor protection.
Decade V (1991 - 2000) - Liberalization of Indian Economy and End of License Raj
Jan 1991 - Indian Economic Crisis - Indian foreign exchange reserves could barely finance three weeks' worth of imports while the government came close to defaulting on its financial obligations. Moody and global credit-rating agencies downgraded India from investment grade making it impossible to even get short term loans and the government was in no position to give any commitment to reform the economy. The World Bank and IMF also stopped their assistance, leaving the government with no option except mortgaging the country's gold to avoid defaulting on payments.
July 1991 - To come out of above mentioned crisis, the Reserve Bank of India had to airlift 47 tons of gold to the Bank of England and 20 tons of gold to the Union Bank of Switzerland to raise $600 million. but the government was quick to repurchase it months later as the situation improved.
July 1991 - Reserve Bank of India lowered the value of the currency by 9%, and then by 11% just two days later. This was when the economy was facing its worst crisis, and the country’s foreign exchange reserves could pay for only three weeks of imports.
1991 - Economic Liberalization was initiated by Indian prime minister P. V. Narasimha Rao and his finance minister Manmohan Singh in response to a macroeconomic crisis. The goal of making the economy more market-oriented and expanding the role of private and foreign investment. Licences Raj ended with economic liberalization in India.
Apr 1992 - Indians were introduced to the term ‘stock market scam’ when stockbroker ‘Big Bull’ Harshad Mehta was caught using the government bond market to fund his purchases. It was a scam pegged at ₹4,025 crore, and accelerated the rise of the Securities and Exchange Board of India as it exists today.
1992 - Dr Ramachandra H Patil came to the scene and helped found the National Stock Exchange of India and several other institutions, which completely changed the face of Indian capital market.
Decade VI (2001 - 2010) - Decade of India's biggest scams
2001 - The gigantic Ketan Parekh Scam, unearthed in March 2001, engulfed top institutions including the Unit Trust of India (UTI), the Bank of India (BoI) and the Madhavpura Mercantile Cooperative Bank (MMB). The Ketan Parekh scam was the second most important scam that rocked the Bombay Stock Exchange after the Harshad Mehta scam.Serious Frauds Investigation Office (SFIO) had estimated that the extent of the fraud could touch Rs 30-40,000 crores.
2002 - In 2002, Abdul Karim Telgi was charged for counterfeiting stamp paper in India. He appointed 350 fake agents to sell stamp papers to banks, insurance companies, and stock brokerage firms. The scam spread across 12 States and the amount involved was pegged at Rs 200 billion.
2007 - The financial crisis of 2007–08, also known as the Global Financial Crisis (GFC), was a severe worldwide economic crisis. India escaped the direct adverse impact of the Great Recession, since its financial sector, particularly its banking, is very weakly integrated with global markets and practically unexposed to mortgage-backed securities
2008 - 2G Spectrum Scam surfaced when it was revealed that the government, in 2008, had undercharged mobile telephone companies for frequency allocation licences. These licences are used to create 2G spectrum subscriptions for cell phones. The Comptroller and Auditor General of India stated that “the difference between the money collected and that mandated to be collected was Rs 1.76 trillion”. Scam reveled in Feb 2012.
2009 - Satyam Scam, dubbed as ‘India’s Enron scandal’, the 2009 corporate scam shook the Indian investors and shareholders community. Ramalinga Raju, the Chairman of Satyam Computer Services, confessed that he had falsified the company's accounts, inflating the revenue and profit. The fraud involved Rs 14,000 crore.
2009 - Coalgate Scam that involved bureaucrats, political leaders and several ministers from the ruling political party. The Comptroller and Auditor General, India’s audit watchdog, reported inefficient and possibly illegal allocation of coal blocks between 2004 and 2009. While initially the loss to the exchequer was pegged at Rs 10.7 lakh crore, the final report stated that the scam amounted to Rs 1.86 lakh crore. Scam unearthed in Sept 2012.
2010 - The Commonwealth Games Scam took India by storm in 2010 involving a pilferage of around Rs 70,000 crore. Since its inception, the games were tangled in a maze of corrupt deals. This included inflated contracts, criminal conspiracy, cheating, and forgery. And in the centre of the corruption was Suresh Kalmadi, the then Pune Lok Ssabha MP.
Decade VII (2011 - Current) - Second wave of Economic reforms with new government
May 2014 - Narendra Modi replaced the Planning Commission with NITI Aayog (NITI stood for National Institute for Transforming India, in line with Modi’s penchant for acronyms). The Planning Commission was a Soviet-style body that drew up five-year plans for the country and played an advisory role in formulating allocation of central funds to each state. NITI Aayog now serves as the government’s think tank, formulating medium- and long-term strategies and breaking them into year-wise plans after consultation with the states.
May 2015 - On May 11, 2015, the Lok Sabha passed a bill to deal with black money stashed abroad - Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015
2016 - VijayMallya absconded the country and sought refuge in the UK after he was accused of fraud and money laundering in the country.Vijay Mallyaallegedly owes various banks over Rs 9000 crores, which he'd taken as a loan to keep his now defunct Kingfisher airlines from failing. He was recently declared a fugitive economic offender under the Fugitive Economic Offenders Act.
Nov 2016 – Biggest demonetization in the world. PM Narendra Modi in his speech on 8th Nov 2016 mentioned, “To break the grip of corruption and black money, we have decided that the five hundred rupee and thousand rupee currency notes presently in use will no longer be legal tender from midnight tonight.”
Dec 2015 - Government introduced the Insolvency and Bankruptcy Code. The code made it possible for lenders to oust errant promoters from a company and hand it over to financially sound owners. The success of the IBC is questionable, but it has created a sense of responsibility among promoters.
July 2017 - India introduced Goods and Services Tax (GST). India is now one of the few countries to have an indirect tax law that unifies various central and state tax laws.
2018 - One of the most controversial scams worth Rs. 11,000 Crores. In 2018, PNB filed a case with CBI accusing Nirav Modi and the companies he was connected to of obtaining Letters of Undertaking (LoUs) from PNB without paying up the margin amount against loans. This meant that if those companies failed to pay the loan, PNB would have had to pay the amount.
Mar 2020 - Corona virus pandemic hits the global economy