The rise of India as a modern-era economic power has been remarkable considering it really began only 16 years ago.

In 1947, a newly liberated India was a poor, village-centric society with economic growth at barely 1 per cent a year.

In the vacuum left by the British, the country’s first leaders turned away from Western capitalist principles to follow the Soviet socialist model of central planning and state-controlled industry.

After 200 years of colonial rule, India was determined, above all, to be self-sufficient.

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Such inward thinking led to the creation of a closed economic structure destined ultimately to stifle entrepreneurship with reams of red tape and feed corruption through a bloated government bureaucracy for the next 40 years.

The licence raj was an era of intense frustration for businessmen prevented from taking more than a fistful of dollars out of the country and forced to bribe officials even to get a phone line and a photocopier.

It was not until 1991, after a balance-of-payments crisis and a bailout by the International Monetary Fund, that its foundations were swept away with economic reforms designed to open India to foreign investment and encourage domestic private enterprise.

Once the state-run monopolies were broken down and competition allowed to flourish, many of India’s monolithic industrial sectors were set free, paving the way for a period after 2002 of unprecedented economic growth that, at present, is running at more than 9 per cent a year.

Sixty years after Independence, India is a prime foreign investment destination with one of the world’s best-performing stock markets.

The Sensex, Bombay’s benchmark 30-share index exchange, has risen more than 200 per cent in the past five years to a market capitalisation of $1 trillion (£500 billion) and is in sight of a record 16,000 points, despite the recent world market meltdown.

In 1993 the exchange market had only18 registered foreign institutional investors.

As of June this year the number had swelled to more than 1,000.

Their investments this year alone have crossed the $10 billion mark on a flurry of big initial public offerings.

Since it opened up its capital markets, India has attracted more than $53 billion in foreign investment.

Rolling reforms and no immediate end in sight for a services-led, consumer-driven economic boom are expected to see the trend continue.

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