Independence to 1991

In India, the growth rate of real GDP per capita (constant price: Chain series) (1950-2006). Data source: Penn World tables.Indian economic policy after independence was influenced by the colonial experience (which was seen by the Indian leadership as in the nature of operations), and those of the heads of exposure Fabian socialism. Politics tended toward protectionism, with a strong emphasis on import substitution, industrialization, state intervention in the labour and financial markets, a large public sector, business regulation, and from central planning. Jawaharlal Nehru, the first prime minister, as well as the statistician Prasanta Chandra Mahalanobis, led by Indira Gandhi developed and overseen economic policy. They expected the favourable results of this strategy, since it involved both public and private sectors and was based on direct and indirect state intervention, rather than the most extreme of Soviet-style system of central command. The policy of concentrating simultaneously on capital and technology-intensive and heavy industry subsidizing manual, low-skill industries has been criticized by the economist Milton Friedman, who thought it would waste capital and labour , and delay the development of small manufacturers.

Per capita GDP (at PPP) of South Asian economies versus those of South Korea, as a percentage of the US India's low average growth rate from 1947–80 was derisively referred to as the Hindu rate of growth, due to the unfavourable comparison with growth rates in other Asian countries, in particular the "Tigers of East Asia".

After 1991

In the late 80s, the government headed by Rajiv Gandhi eased restrictions on the expansion of the capacity for incumbents, removed price controls and the reduction of corporate taxes. Although this increase in the growth rate, it also led to high fiscal deficits and a worsening of the current account. The collapse of the Soviet Union, which was India's main trading partner, and the first Gulf War, which led to a rise in oil prices has caused a great balance of payments crisis in India, which found itself faced with the prospect of a default on its loans. In response, Prime Minister Narasimha Rao with his Finance Minister Manmohan Singh, has initiated economic liberalization in 1991. The reform abolished the Licence Raj (investment, industry and import licensing) and many public monopolies ended, which allows automatic approval of foreign direct investment in many sectors. Since then, the overall direction of liberalization has remained the same, irrespective of the party in power, though none has yet tried to take on powerful pressure groups, such as trade unions and farmers, or matters controversial, such as the reform of labour laws and the reduction of agricultural subsidies.

Since 1990, India has emerged as one of the richest economies in the developing world, during this period, the economy has grown steadily, but with a few major setbacks. This was accompanied by an increase in life expectancy, literacy rate and food security.