The fourth-quarter GDP numbers for the fiscal year 2019–20, showed the annual expansion in the GDP at 4.2% — the lowest pace ever of growth in 11 years. These numbers bring back the discussion to the topic, is India leading towards capitalism, or has it already transitioned, and if it has then what are the impacts it has on economic growth?
Well, let’s start with the basics.
Capitalism is defined as an economic, political & social system in which property, business & industry are privately owned directed towards making the greatest possible profits for successful organization & people and not the state. The debate of whether capitalism is good for the long run is ongoing but there certainly are some merits as well as demerits of the system.
Pros: economic freedom, innovation, good incentives, value for money, meritocracy. Cons: monopoly, inequality of assets, crony capitalism, lobbying-legalized bribery, ignored externalities- social benefits disregarded, delimited control of resources could result in influence on the government.
CAPITALISM IN INDIA
India’s journey towards capitalism should be dated back to the beginning of the 20th century. However, India’s transition to capitalism & liberalization of trade could be factored to two major events of the end of the 20th century, namely Privatisation & FDI (1991–92). Since then there have been changes in the government but capitalism seems not to evolve in the country even stated as crony by various experts.
EFFECTS OF CAPITALISM ON INDIA
India as a developing country has great potential in the global market but the fluctuating growth rates as mentioned by the official records might turn out to be a great downfall in the economic growth of the country. Various studies and statistics show that India has its top 1% owning nearly more than half of the total wealth. Thomas Piketty mentioned in his paper that income inequality is at its peak in India. Forbes reported that the wealth of India’s top 10 billionaires rose rapidly between 2014–18. With the pandemic in the mix and India- China tension resulting in discontinued trade and investment has certainly worsened the situation. The unemployment rate has gone high and the capital stays rotated within the top layers of economic tropics inclining towards monopoly; the Indian economic growth is on the verge of sinking.
Inclusive capitalism, sustainable investments could prove a beneficial way to evolve capitalism. (WEF 2019)
Contributed by Kunwar Akanksha content writer at Mitti Ke Rang
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