Known and Unknown

INDEPENDENCE SPECIAL: ECONOMY

Global player
It's hard to think of India as a recipient of foreign investment during British rule, but according to economic historian Angus Maddison, in 1913, a total of $2.1 bn (Maddison converts 1913 dollars into current dollars) of foreign money was invested in India as compared to $1.6 bn in China "" in per capita terms, FDI in India was $6.9 as compared to China's 3.7. Over time, the picture reversed and in 2006, China got $55 bn of FDI versus $19 bn for India.

At current exchange rates, India's exports in 1950 were $1.2 bn as compared to China's $0.6 bn and Japan's $0.8 bn. By 1998, the comparable figures were $33.7 bn, $183.6 bn and $388.1 bn! As for global exports, India's share fell from 2.1 per cent to 0.7 per cent between 1950 and 1998, China's rose from 1.1 to 3.8 per cent and Japan's from 1.6 per cent to 8.1 per cent.

Taxing times
Moghul taxation (on land) took away 15 per cent of GDP; this fell to 6 per cent when the British left. Today, central and state taxes account for 18 per cent of GDP. The highest personal tax rate was 25 per cent in 1949-50, rose to a dizzying 93.5 by 1970-71, fell in 1974-75 and stabilised at around 30 in 1997-98.

Less verbose
In the early days, the Economic Survey ran into 30-40 notebook size pages, and had separate data on private and government imports. Surveys between 1955-56 and 1958-59 show the impact of the heavy industry investment strategy.

Private imports fell from 82 per cent of the total to around half, and private consumer goods imports fell from 14 per cent to 4 per cent. And though most policies, then as now, were sanctified in the name of the poor, it was only in the 1990-91 Survey that a separate chapter was devoted to the social sector and explicit poverty data given.

Paradise lost
In terms of PPP dollars, says Maddison, India's per capita income was $705 in 1950 versus China's $477, and Korea's $1,058. But by 2006, India's per capita GDP rose to $3,479 (in PPP terms) while China's rose to $6,845 and South Korea's to $20,065.

And, according to economist Surjit Bhalla, India's global ranking in 1950 was 160 compared to China's 173 and Korea's 137; by 2006, India rose to 120, China to 83 and South Korea to 30.

To take a longer view, according to Maddison, India accounted for 24.5 per cent of global GDP in 1500 (and 25 per cent of population); this fell to 4.2 per cent in 1980 (its population share was down to 14.2 per cent) and then rose to 5 per cent in 1998 (population share rose to 16 per cent).

what goes around...
In the early days of planning, investment was everything "" the 1960-61 Economic Survey spoke of how "undue increase in consumption" needed to be "held firmly in check".

This changed over the years, and consumption began to determine the pace of growth. A few years ago, things changed once again and, in 2006-07, investment accounted for 54 per cent of the growth impulse in the economy.

New pyramid
India is a poor country and the poor always outnumber the rich. Things are changing, and according to NCAER, the middle class (with household income of Rs 2-10 lakh p.a.) will grow from 2.8 per cent of the population in 1995-96 to 12.8 per cent of the population by 2009-10, and the rich (incomes over Rs 10 lakh) will rise from 0.2 per cent to 1.7 per cent of total population.