THE INDIAN ECONOMY IN THE FIRST QUARTER OF THE 21ST CENTURY: DEVELOPMENT AND RESULTS

Abstract

The paper provides an analytical overview of the evolution of the Indian economy in the first quarter of the 21st century, focusing on the key transformations, policy measures, and outcomes of the reform process initiated in 1991. Following the liberalization, privatization, and globalization reforms introduced by the Narasimha Rao government, India has achieved sustained economic growth, averaging 6–7% annually, and has become the fourth largest economy in the world by nominal GDP and the third by purchasing power parity (PPP) in 2025. The paper explores the country’s structural shifts — from a highly regulated system under the so-called License Raj to a diversified market economy driven by the expansion of services, IT, and manufacturing industries, accompanied by significant foreign direct investment inflows.
A special section examines the Indian rupee and monetary policy as central components of this transformation. The paper analyzes the exchange rate regime, the tools of the Reserve Bank of India (RBI) for managing inflation and liquidity, and the accumulation of foreign exchange reserves exceeding USD 600 billion in 2024. It also evaluates the rupee’s gradual internationalization: its share in global FX turnover rose to 2.4% in 2025 (BIS data), while its use in cross-border trade settlements increased following RBI’s 2022 framework for invoicing and settlement of international trade in rupees. Although still far from the global role of the Chinese yuan, the Indian currency demonstrates growing credibility and regional significance.
Methodologically, the paper applies comparative, structural, and statistical approaches to identify India’s main achievements and challenges. The conclusions emphasize the sustainability, inclusiveness, and global relevance of India’s economic rise in the 21st century.