July 1991 was a turning point in the history of India, when economic liberalization was introduced, thanks to Dr. Manmohan Singh, the then Finance Minister in the Narasimha Rao government. Since then, the growth of the Indian economy has been steady, albeit at a very slow pace.
During the years between the independence and the late 80s, India economic growth relied heavily on the government policies. It was a centrally governed market. There were neither enough foreign investment, nor was the Indian market a consumer-based market, which resulted in a stagnated economy. The slight economic growth during Rajiv Gandhi tenure seemed promising, but it did not really take off. The unprecedented balance payment problem, the fall of the Soviet, which was one of India principal foreign market, and the IMF demand of the bailout loan, did not help India economic cause.
When the country entered the last decade of the previous century, however, things started to improve. The 1990s economic reformation saw many restrictions lifted off from private companies. Telecom, service, industrial, and agricultural sector have seen tremendous economic growth since then. Statistics place the service industry contribution to the Indian economy to almost 55%, and the agricultural and industrial sector has seen 17% growth. The IT boom in the 90s too helped to stabilize the growth of the economy. The introduction of many new sectors solved the unemployment problem considerably.
Since the introduction of the economic liberalization, India has seen an average growth of 6-7%. The main contribution for the economic liberalization is the globalization of India. Today India is the third largest foreign investor in the US. Foreign investors are fighting to get a piece of Indian market, as the returns are greater here. PricewaterhouseCoopers have stated in its report that India could soon become the world third largest economy in purchasing power parity (PPP) by 2010, displacing Japan. And by 2020, India is expected to become the third largest economy after the US and China.