Economy of India

Economy of India

Currency Fiscal year Trade organisations

1 Indian Rupee (INR) (₨) = 100 Paise April 1–March 31 WTO, SAFTA

Statistics GDP GDP growth GDP per capita GDP by sector $1.209 trillion (2008 est.)[1] 6.7% (2009)[2] $1016 [3] agriculture: 17.2%, industry: 29.1%, services: 53.7% (2008 est.) Inflation (CPI) Population below poverty line Labour force Labour force by occupation 523.5 million (2008 est.) agriculture: 60%, industry: 12%, services: 28% (2003) 7.8% (CPI) (2008) 22% (2008)[4]

Unemployment Main industries

6.8% (2008 est.) textiles, chemicals, food processing, steel, transportation equipment, cement, mining, petroleum, machinery, software External

Exports Export goods

$175.7 billion f.o.b (2008 est.) petroleum products, textile goods, gems and jewelry, engineering goods, chemicals, leather manufactures

Main export partners Imports Import goods Main import partners

US 15%, the People's Republic of China 8.7%, UAE 8.7%, UK 4.4% (2007) $287.5 billion f.o.b. (2008 est.) crude oil, machinery, gems, fertilizer, chemicals People's Republic of China 10.6%, US 7.8%, Germany 4.4%, Singapore 4.4% Public finances

Public debt Revenues Expenses

$163.8 billion (2008) $153.5 billion (2008 est.) $205.3 billion (2008 est.)

The economy of India is the twelfth largest economy in the world by market exchange rates[5] and the fourth largest by purchasing power parity (PPP) basis.[6]

Thus. The service sector makes up a further 28%. information technology enabled services and software. water buffalo. cement. food processing. India continues to face several major problems. more than double the same poverty rate in China. India's total merchandise trade (counting exports and imports) was valued at $294 billion in 2006 and India's services trade inclusive of export and import was $143 billion.[7][8][9][10] Since 1991. tea. India's trade has reached a still relatively moderate share 24% of GDP in 2006. and industrial sector around 12%. chemicals.[8] India currently accounts for 1. cattle. continuing economic liberalisation has moved the economy towards a market-based system.[16] while its per capita (PPP) of US$2.1 Pre-colonial o 1. The recent economic development has widened the economic inequality across the country.[20] Even though the arrival of Green Revolution brought end to famines in India.[21] 40% of children under the age of three are underweight and a third of all men and women suffer from chronic energy deficiency. According to the World Trade Statistics of the WTO in 2006. up by a record 72% from a level of $253 billion in 2004. leading to pervasive corruption and slow growth. transportation equipment.[22] • 1 History o 1. Agriculture is the predominant occupation in India.[15] India's per capita income (nominal) is $1016.[11] [12][13] India's large service industry accounts for 54% of the country's GDP while the industrial and agricultural sector contribute 29% and 17% respectively. The economy was characterised by extensive regulation.[8] Despite robust economic growth. wheat. jute. Major agricultural products include rice. oilseed.[17][18] Previously a closed economy.[15] Major industries include textiles. ranked 142th in the world. mining. and public ownership. India's global economic engagement in 2006 covering both merchandise and services trade was of the order of $437 billion. approximately 80% of its population lives on less than $2 a day (nominal). sheep.[14] The labor force totals half a billion workers. India's trade has grown fast. By 2009. poultry and fish. steel.5% of World trade as of 2007 according to the WTO. potatoes.[19] Despite sustained high economic growth rate.2 Colonial . cotton.762 is ranked 129th. goats.India was under socialist-based policies for an entire generation from the 1947 until 1991. machinery. protectionism. petroleum. sugarcane.[8][9] A revival of economic reforms and better economic policy in 2000s accelerated India's economic growth rate. accounting for about 60% of employment. up from 6% in 1985. India had prominently established itself as the world's second-fastest growing major economy.

1.7 Economic disparities  7.1.3 Foreign direct investment in India 4 Currency 5 Income and consumption 6 Employment 7 Economic trends o 7.3 Banking and finance o 2.1.• • • • • • 1.1 Agriculture o 2.2 Corruption  7.1.2 Balance of payments o 3.3 Independence to 1991 1.6 Labour laws  7.4 Education  7.2 Industry and services o 2.1.1.4 Natural resources 3 External trade and investment o 3.1 Global trade relations o 3.3 Government  7.1.4 After 1991 2 Sectors o 2.1 Agriculture  7.1 Issues  7.5 Infrastructure  7.1.8 Environment and health o o History .

beginning with the pre-colonial period lasting up to the 17th century. food processing and crafts. Although many kingdoms and rulers issued coins. which included the world's first urban sanitation systems and the existence of a form of municipal government. a permanent and predominantly urban settlement that flourished between 2800 BC and 1800 BC. domesticated animals.[24] The citizens of the Indus Valley civilisation. The third period stretches from independence in 1947 until now.[25] The 1872 census revealed that 99. such as textiles. a drainage system and water supply reveals their knowledge of urban planning. Villages paid a portion of their agricultural produce as revenue to the rulers. and traded with other cities. with agriculture the predominant occupation. This satisfied the food requirements of the village and provided raw materials for hand-based industries.[27] .Silver coin minted during the reign of the Gupta king Kumara Gupta I (AD 414–55) Main articles: Economic history of India and Timeline of the economy of India India's economic history can be broadly divided into three eras. practiced agriculture.3% of the population of the region constituting present-day India resided in villages. Evidence of well planned streets. while its craftsmen received a part of the crops at harvest time for their services. The advent of British colonisation started the colonial period in the 17th century. Pre-colonial The spice trade between India and Europe was one of the main drivers of the world economy[23] and the main catalyst for the Age of Discovery. which ended with independence in 1947. barter was prevalent. used uniform weights and measures.[26] whose economies were largely isolated and self-sustaining. made tools and weapons.

shawls. ensuring the division of labour.[33] The economic policies of the British Raj effectively bankrupted India's large handicrafts industry and caused a massive drain of India's resources. Until 1857. central and parts of south and north India were integrated and administered by the Maratha Empire. the Middle East and South East Asia in return for gold and silver. owing to the lack of quantitative information. After the loss at Panipat. Calicos. Pune and Kolhapur. After the decline of the Mughals. played an influential role in shaping economic activities. 100 million. cinnamon. providing for the training of apprentices and. was Rs.[31] India.[30] Assessment of India's pre-colonial economy is mostly qualitative. 30M. Nagpur. Company rule in India brought a major change in the taxation environment from revenue taxes to property taxes. at its peak. resulting in mass impoverishment and destitution of majority of farmers and led to numerous famines.[34][35] Indian . Gwalior state had a budget of Rs. when India was firmly under the British crown. producing each variety of cloth was the specialty of a particular sub-caste. especially Hinduism. allowing manufacturers to achieve narrow specialization. and agricultural products such as pepper. manufacturing and credit. the country remained in a state of political instability due to internecine wars and conflicts. Estimates of the per capita income of India (1857–1900) as per 1948–49 prices. which was the economic hub of British India. The Maratha Empire's budget in 1740s. For instance. British East India company entered the Indian political theatre. One estimate puts the revenue of Akbar's Mughal Empire in 1600 at £17.Religion. However. the Maratha Empire disintegrated into confederate states of Gwalior. saw increased industrial activity during World War II. was a largely traditional agrarian economy with a dominant subsistence sector dependent on primitive technology. Jhansi. Indore. It existed alongside a competitively developed network of commerce. and the caste and the joint family systems. opium and indigo were exported to Europe. by the time of the arrival of the British. in some cases. which totalled £16 million. Calcutta. at this time.[28] The caste system functioned much like medieval European guilds.5 million. in certain regions. Baroda. western.[29] Textiles such as muslin. in contrast with the total revenue of Great Britain in 1800.[32] Colonial An aerial view of Calcutta Port taken in 1945.

Steel.6% in 1700. to a low of 3. and created a single currency with fixed exchange rates. regulations and the accompanying red tape.[42] . on paper. and central planning. business regulation. among other industries. An estimate by Cambridge University historian Angus Maddison reveals that India's share of the world income fell from 22. and left-nationalist economic historians have blamed colonial rule for the dismal state of India's economy in its aftermath and that financial strength required for Industrial development in Europe was derived from the wealth taken from Colonies in Asia and Africa. telecommunications. Policy tended towards protectionism. water. at the end of colonial rule. state intervention in labor and financial markets. commonly referred to as Licence Raj. as strategy to diminish British economic superiority by boycotting British products and the reviving the market for domesticmade products and production techniques.[41] Elaborate licences. India had become a strong market for superior finished European goods. agriculture unable to feed a rapidly growing population. The graph shows GDP per capita of South Asian economies and South Korea as a percent of the American GDP per capita. the effects of which was deprived to Colonial India.[40] Five-Year Plans of India resembled central planning in the Soviet Union. However. and low rates for literacy. Indian economic policy after independence was influenced by the colonial experience (which was seen by Indian leaders as exploitative in nature) and by those leaders' exposure to Fabian socialism. The impact of the British rule on India's economy is a controversial topic. Both started from about the same income level in 1950. a common-law and an adversarial legal system.8% in 1952. comparable to Europe's share of 23. and significant growth in production and trade. a large public sector. Leaders of the Indian independence movement.[37] India's colonisation by the British coincided with major changes in the world economy—industrialisation.[36] It also created an institutional environment that. with a strong emphasis on import substitution.[39] Independence to 1991 Compare India (orange) with South Korea (yellow). were required to set up business in India between 1947 and 1990. encouraged free trade. a civil service that aimed to be free from political interference. At the same time right-wing historians have countered that India's low economic performance was due to various sectors being in a state of growth and decline due to changes brought in by colonialism and a world that was moving towards industrialization and economic integration.3%.[38] with industrial development stalled. capital markets. were effectively nationalized in the mid-1950s. India had one of the world's lowest life expectancies. and electrical plants. mining. standardized weights and measures. guaranteed property rights among the colonizers. The Nationalists had hoped to revive the domestic industries that were badly effected by polices implemented by British Raj which had made them uncompetitive to British made goods. This was because of vast gains made by the Industrial revolution in Europe. insurance. industrialization. machine tools. It also established a well developed system of railways and telegraphs.Nationalists employed the successful Swadeshi movement. India inherited an economy that was one of the poorest in the developing world.

once accepted as inevitable. industrial and import licensing) and ended many public monopolies. carried on by Indira Gandhi formulated and oversaw economic policy. While this increased the rate of growth. and the first Gulf War. or contentious . their introduction after 1965 and the increased use of fertilizers and irrigation are known collectively as the Green Revolution. which caused a spike in oil prices. the government led by Rajiv Gandhi eased restrictions on capacity expansion for incumbents.[43][dead link] The policy of concentrating simultaneously on capital. which was India's major trading partner. although no party has tried to take on powerful lobbies such as the trade unions and farmers. because it involved both public and private sectors and was based on direct and indirect state intervention.[37] The Rockefeller Foundation's research in high-yielding varieties of seeds.[48] Since then.[44][dead link] India's low average growth rate from 1947–80 was derisively referred to as the Hindu rate of growth. because of the unfavourable comparison with growth rates in other Asian countries. The collapse of the Soviet Union. has not returned since the end of colonialism. The reforms did away with the Licence Raj (investment. Shown here is the Indian School of Business at Hyderabad. who thought it would waste capital and labour. removed price controls and reduced corporate taxes. along with the statistician Prasanta Chandra Mahalanobis. ranked number 15 in global MBA rankings by the Financial Times of London in 2009. it also led to high fiscal deficits and a worsening current account. which in return demanded reforms. After 1991 Main articles: Economic liberalization in India and Economic development in India Major improvements in educational standards across India has helped its economic rise. Famine in India. caused a major balance-of-payments crisis for India. irrespective of the ruling party.[dead link][46] India asked for a $1. thus improving agriculture in India. which found itself facing the prospect of defaulting on its loans.8 billion bailout loan from IMF. especially the "East Asian Tigers". allowing automatic approval of foreign direct investment in many sectors. They expected favorable outcomes from this strategy. rather than the more extreme Soviet-style central command system. which provided the increase in production needed to make India self-sufficient in food grains.and technology-intensive heavy industry and subsidizing manual. low-skill cottage industries was criticized by economist Milton Friedman. the overall direction of liberalisation has remained the same. the first prime minister.[45] In the late 80s.Jawaharlal Nehru. and retard the development of small manufacturers.[47] In response. Prime Minister Narasimha Rao along with his finance minister Manmohan Singh initiated the economic liberalisation of 1991.

[49] Since 1990 India has emerged as one of the fastest-growing economies in the developing world. it has been raised to investment level in 2007 by S&P and Moody's. behind US and China. and Fishing in India India ranks second worldwide in farm output. employed 60% of the total workforce[14] and despite a steady decline of its share in the GDP.[51][52] Sectors Agriculture Farmers work inside a rice field in Andhra Pradesh. logging and fishing accounted for 16.[dead link][56] It also has the world's largest cattle population (193 million). ginger.[50] In 2003. turmeric and black pepper. India is the second largest producer of rice in the world after China[53] and Andhra Pradesh is the 2nd largest rice producing state in India and West Bengal being the largest rice producing state in India. tea. Yields per unit area of all crops have grown since 1950. However. sugar. Agriculture and allied sectors like forestry. cashew nuts. due to the special emphasis placed on agriculture in the five-year plans and steady improvements in irrigation. By 2035. Germany. While the credit rating of India was hit by its nuclear tests in 1998. Goldman Sachs predicted that India's GDP in current prices will overtake France and Italy by 2020. it was projected to be the third largest economy of the world.[54] Main articles: Agriculture in India. application of modern agricultural practices and provision of agricultural credit and subsidies since Green revolution in India. UK and Russia by 2025 and Japan by 2035. rice. groundnut and inland fish. Forestry in India. is still the largest economic sector and plays a significant role in the overall socio-economic development of India.[58] India accounts for 10% of the world fruit production with first rank in the production of bananas.6% of the GDP in 2007. international comparisons reveal that the average yield in India is generally 30% to 50% of the highest average yield in the world. technology.[58] It is the third largest producer of tobacco. the economy has grown constantly. coconuts.issues such as reforming labour laws and reducing agricultural subsidies.[57] It is the second largest producer of wheat. This has been accompanied by increases in life expectancy. literacy rates and food security.[55] India is the largest producer in the world of milk. during this period. sapotas and mangoes.[58] Industry and service . Animal husbandry in India. but with a few major setbacks.

revamping management. India has Asia's largest outsourcing industry[59] and is the world's second most favorable outsourcing destination after the United States.[60] India has one of the world's fastest growing automobile industries[61][62] and is global leader of auto industry.6% of the GDP and employ 17% of the total workforce.[73] In March 2009. about one-third of the industrial labour force is engaged in simple household manufacturing only. It has the largest share in the GDP. accounting for 55% in 2007 up from 15% in 1950.[14] Business services (information technology. It has since handled the change by squeezing costs.8 % in 200506 to 7% in 2008. annual revenues from outsourcing operations in India amounted to US$60 billion and this is expected to increase to US$225 billion by 2020.[68] Textile manufacturing is the second largest source for employment after agriculture and accounts for 26% of manufacturing output. casual wear and sportswear. including the threat of cheaper Chinese imports.[14] However.5% in 1991–2000 up from 4. Economic reforms brought foreign competition. opened up sectors hitherto reserved for the public sector and led to an expansion in the production of fast-moving consumer goods.[63] Shown here is Tata Motors' Nano. led to privatisation of certain public sector industries.[64] Industry accounts for 27. business process outsourcing) are among the fastest growing sectors contributing to one third of the total output of services in 2000.[70] Dharavi slum in Mumbai has gained fame for leather products. the Indian private sector. and it is growing fast. world's least expensive car in production. [65][dead link] In absolute terms.Development center of OFSS in Bangalore. but highly skilled. It provides employment to 23% of work force. knitted garments. The growth in the IT sector is attributed to increased specialization. India is 16th in the world in terms of nominal factory output. information technology enabled services.[67] Post-liberalisation.5% in 1951–80. on the supply side.[66] India's small industry makes up 5% of carbon dioxide emissions in the world. and an availability of a large pool of low cost. or those looking to outsource their operations. educated and fluent Englishspeaking workers. which was usually run by oligopolies of old family firms and required political connections to prosper was faced with foreign competition.[69] Tirupur has gained universal recognition as the leading source of hosiery. seven Indian firms were listed among the top 15 technology outsourcing companies in the world. matched on the demand side by an increased demand from foreign consumers interested in India's service exports. Tata Motors' Nano attempts to be the world's cheapest car. growth rate 7.[64] India is fifteenth in services output. focusing on designing new products and relying on low labour costs and technology.[71][72] In 2009.[74] . The share of India's IT industry to the country's GDP increased from 4.

[81] Since liberalisation. together known as scheduled banks). There are taxes for moving goods to states. but growing at double digits.[79][80] The public sector banks hold over 75% of total assets of the banking industry. Number of banks are in brackets. the number of bank branches has increased from 10. from states.[76] Banking and finance Main article: Finance in India See also: Banking in India and Insurance in India Structure of the organised banking sector in India.[75] Tourism in India is relatively undeveloped.000 during the same period. retail trade. Organized retail such supermarkets accounts for just 4% of the market as of 2008.[77] The Indian money market is classified into: the organised sector (comprising private.120 in 1969 to 98. over thirty regulations such as "signboard licences" and "anti-hoarding measures" may have to be complied before a store can open doors. [75] Regulations prevent most foreign investment in retailing. etc.270 out of 5 lakh (500. The unorganised sector and microcredit are still preferred over traditional banks in rural and sub-urban areas. public and foreign owned commercial banks and cooperative banks. Despite an increase of rural branches. and even within states.Most Indian shopping takes place in open markets and millions of independent grocery shops called kirana. Some hospitals woo medical tourism. the government has approved significant banking reforms. and made it mandatory for banks to provide 40% of their net credit to priority sectors like agriculture.860 or 22% of the total number of branches in 1969 to 32. followed by six others in 1980.5% respectively. small-scale industry. While some of these relate to nationalised banks (like . and the unorganised sector (comprising individual or family owned indigenous bankers or money lenders and non-banking financial companies (NBFCs)).270 or 48%. only 32.2% and 6.000) villages are covered by a scheduled bank. especially for nonproductive purposes. from 1. Shown here is the World Trade Center of Mumbai Prime Minister Indira Gandhi nationalised 14 banks in 1969. Since then.910 in 2003 and the population covered by a branch decreased from 63. The total deposits increased 32. Moreover.[78] Mumbai is the financial and commercial capital of India. small businesses. like ceremonies and short duration loans. with the private and foreign banks holding 18.6 times between 1971 to 1991 compared to 7 times between 1951 to 1971.800 to 15. to ensure that the banks fulfill their social and developmental goals.

400 km² and receives an average annual rainfall of 1. Gujarat. the government has approved significant banking reforms. India has a total water surface area of 314.[87] of which Bombay High is believed to hold 6. other reforms have opened up the banking and insurance sectors to private and foreign players. houses. reducing government interference and increasing profitability and competitiveness).587 MW. titanium. India's dwindling uranium reserves stagnated the growth of nuclear energy in the country for many years.1 billion barrels[88] and Mangala Area in Rajasthan an additional 3. limestone and thorium. India's inland water resources comprising rivers.269. Tamil Nadu. ponds and lakes and marine resources comprising the east and west coasts of the Indian ocean and other gulfs and bays provide employment to nearly 6 million people in the fisheries sector.[14][82] More than half of personal savings are invested in physical assets such as land. India had the world's third largest fishing industry.[89] India's huge thorium reserves — about 25% of world's reserves — is expected to fuel the country's ambitious nuclear energy program in the long-run.[14][86] India's total proven oil reserves stand at 11 billion barrels.[84] India's major mineral resources include coal. found in Bombay High off the coast of Maharashtra. with the balance accounted for by industrial and domestic consumers.[83] Natural resources Main article: Natural resources in India See also: Energy policy of India India has the world's fifth largest wind power industry. reducing government interference and increasing profitability and competitiveness). chromite.6 billion barrels. with an installed wind power capacity of 9. and is expected to rise to 1. bauxite. India meets most of its domestic energy demand through its 92 billion tonnes of coal reserves (about 10% of world's coal reserves).100 mm.219 km² (56. and gold. Irrigation accounts for 92% of the water utilisation.[14][82] Since liberalisation. other reforms have opened up the banking and insurance sectors to private and foreign players.[85] India's oil reserves. which is decreasing due to constant pressure from an ever growing population and increased urbanisation. canals.050 km² by 2025. In 2008. While some of these relate to nationalised banks (like encouraging mergers.78% of total land area). Rajasthan and in eastern Assam meet 25% of the country's domestic oil demand. Shown here is a wind farm in Muppandal.[90] However. cattle. manganese. iron.encouraging mergers. mica. India's total cultivable area is 1. and comprised 380 km² in 1974. the Indo-US nuclear deal has paved the way for India to import uranium from other .

gems and jewellery. demand for which was generally inelastic. The restrictions ensured that FDI averaged only around US$200 million annually between 1985 and 1991.1.countries. petroleum products. the US. sugarcane). Major import commodities included crude oil and related products.5 billion respectively. chemicals and pharmaceuticals. India's economy is mostly dependent on its large internal market with external trade accounting for just 20% of the country's GDP. gold and silver.[95] India's exports were stagnant for the first 15 years after independence. commercial borrowing and deposits of non-resident Indians. Imports in the same period consisted predominantly of machinery. India's annual imports and exports stood at US$236 and US$155. agricultural products. the UAE. 63. Navi Mumbai. India accounted for 1.06% over the previous year. Japan and the EU.[94] Until the liberalization of 1991.[96] The exports during April 2007 were $12. export obligations and government approvals. to protect its economy and to achieve self-reliance.[93] In 2008. electronic goods.[91] India is also believed to be rich in certain renewable sources of energy with significant future potential such as solar. wind and biofuels (jatropha. the UK.250 crores in 1950–51.8% of global commercial services export. Since liberalization. Foreign trade was subject to import tariffs.[97] In 2006-07. while foreign direct investment (FDI) was restricted by upper-limit equity participation. India's major trading partners are China. export taxes and quantitative restrictions. a large percentage of the capital flows consisted of foreign aid. jute and cotton manufactures. due to nascent industrialization. India has .[92] Shown here is the cargo of a container ship being unloaded at the Jawaharlal Nehru Port. While participating actively in its general council meetings. iron ore and other minerals.[98] India is a founding-member of General Agreement on Tariffs and Trade (GATT) since 1947 and its successor. External trade and investment Further information: Globalisation in India Global trade relations In March 2008. these approvals were needed for nearly 60% of new FDI in the industrial sector. equipment and raw materials. machinery. major export commodities included engineering goods.31 billion up by 16% and import were $17.45% of global merchandise trade and 2. due to the predominance of tea. India was largely and intentionally isolated from the world markets. the WTO.080.109 crores in 2003–04 from Rs. restrictions on technology transfer.68 billion with an increase of 18. textiles and garments. the value of India's international trade has become more broad-based and has risen to Rs.

including the capital account balance) has been positive.5 billion. (2000–2007)[106] Inflows (Million USD) 85. India's foreign currency reserves stood at $285 billion in 2008.72 billion. Declining interest rates and reduced borrowings decreased India's debt service ratio to 4. India's trade deficit reduced to $252. up from 66. account for more than 60% of Indian exports. India's exports have been consistently rising.[105] Foreign direct investment in India Share of top five investing countries in FDI inflows.2% respectively in June 2009.[102] India's reliance on external assistance and commercial borrowings has decreased since 1991–92.[102] The steep decline was because countries hit hardest by the global recession. until this time. the overall balance was only occasionally positive on account of external assistance and commercial borrowings.24%[107] . The Ministry of Finance monitors and regulates these borrowings (ECBs) through ECB policy guidelines. largely on account of increased foreign direct investment and deposits from non-resident Indians. India's balance of payments on its current account has been negative. India imported 120. both Indian exports and imports declined by 29. India has continued its opposition to the inclusion of such matters as labour and environment issues and other nontariff barriers into the WTO policies. more than 3/4th of the domestic demand. External Commercial Borrowings (ECBs) are being permitted by the Government for providing an additional source of funds to Indian corporates. covering 80.been crucial in voicing the concerns of the developing world.2% in 1990–91. since 1996–97 its overall balance of payments (i.5% in 2007. and since 2002–03.1 million tonnes of crude oil. For instance. since the decline in imports was much sharper compared to the decline in exports..[101] Although India is still a net importer.e.3% of its imports in 2002–03. such as United States and members of the European Union. As a result.[103] However. which could be used in infrastructural development of the country if used effectively.[100] In 2007-08. Due to the global late-2000s recession.2% and 39. it has gradually been repaying these debts.[104] In India. India's growing oil import bill is seen as the main driver behind the large current account deficit.[99] Balance of payments Cumulative Current Account Balance 1980-2008 based on the IMF data Since independence. at a cost of $61. Since liberalisation in the 1990s (precipitated by a balance of payment crisis).178 Rank Country Inflows (%) 1 Mauritius 44.

06% As the fourth-largest economy in the world in PPP terms. the government amended the rules to allow 100 per cent FDI in the construction business. Industrial policy reforms have substantially reduced industrial licensing requirements. removed restrictions on expansion and facilitated easy access to foreign technology and foreign direct investment FDI. rigid FDI policies resulted in a significant hindrance. Fields which require relaxation in FDI restrictions include civil aviation. pharmaceuticals. and jewellery. But this still leaves an unfinished agenda of permitting greater foreign investment in politically sensitive areas such as insurance and retailing.177 9.040 15. apparels. FDI inflows into India reached a record $19. resorts. construction development.37% 7.[112] A critical factor in determining India's continued economic growth and realizing the potential to be an economic superpower is going to depend on how the government can create incentives for FDI flow across a large number of sectors in India.2 3 4 5 United States United Kingdom Netherlands Singapore 18. it is expected to be above $35 billion.[108] India has strengths in information technology and other significant areas such as auto components.5 billion in fiscal year 2006-07 (April-March).742 9. Despite a surge in foreign investments. India is a preferred destination for foreign direct investments (FDI). educational institutions.[108] India has a large pool of skilled managerial and technical expertise. petroleum and natural gas. The upward moving growth curve of the real-estate sector owes some credit to a booming economy and liberalized FDI regime. due to some positive economic reforms aimed at deregulating the economy and stimulating foreign investment. India has positioned itself as one of the front-runners of the rapidly growing Asia Pacific Region. The FDI inflow for 2007-08 has been reported as $24 billion[111] and for 2008-09.and regional-level infrastructure.363 11. hospitals. A number of changes were approved on the FDI policy to remove the caps in most sectors. industrial parks. This was more than double the total of US$7. commodity exchanges. housing. However. according to the government's Secretariat for Industrial Assistance. commercial premises. and city. recreational facilities. In March 2005. built-up infrastructure and construction development projects including housing.98% 5. The size of the middle-class population stands at 50 million and represents a growing consumer market.81% 5.8bn in the previous fiscal year.[110] This automatic route has been permitted in townships. hotels.[109] India's recently liberalized FDI policy (2005) allows up to a 100% FDI stake in ventures.[113] . chemicals. creditinformation services and mining.

000 rupee note. The rupee is divided into 100 paise. the country's central bank was established on April 1. manager of exchange control and as an issuer of currency. with the Reserve Bank of India (RBI).2009 is 49. India inherited several institutions. railways.Currency The RBI headquarters in Mumbai Main articles: Indian rupee and Reserve Bank of India The Indian rupee is the only legal tender accepted in India. The exchange rate as of September 1. as foreign institutional investors sold $14 billion worth of Indian stocks in 2008 and invested in US treasury bonds. The RBI is governed by a central board. 1935.[114] 66. and 77.65 to a Euro.0003 rupees to a US dollar. etc. such as the civil services. The highestdenomination banknote is the 1. The RBI.. regulator and supervisor of the financial system. Reserve Bank of India. the lowest-denomination coin in circulation is the 25 paise coin (it earlier had 1.60 to a UK pound. 10 and 20 paise coins which have been discontinued by the Reserve Bank of India).[115] There has been a recent fall in the value of the Rupee as a result of the global financial crisis of 2008. both of which peg their currency to that of the Indian rupee. 2. from its British rulers. Income and consumption Main article: Income in India . 5. It serves as the nation's monetary authority. The headquarters of many financial institutions are also located in the city. Mumbai serves as the nation's commercial capital. The Indian rupee is accepted as legal tender in the neighboring Nepal and Bhutan. headed by a governor who is appointed by the Central government of India. Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) located here.

Percentage of population living under the poverty line of $1 (PPP) a day.[130][131] Employment .6% of the population lives on less than $2 a day (PPP).3% of the population earned less than $1 (PPP. Today. sleeping. that have met with partial success. living in abject poverty.[22][124] However. currently 356.4 a month). According to Times of India. It was down from 86.[116] The World Bank further estimates that a third of the global poor now reside in India.9 m2) per person in urban areas. to alleviate poverty. Some 40% of Indian households owns a bicycle.[126] A 2007 report by the state-run National Commission for Enterprises in the Unorganised Sector (NCEUS) found that 65% of Indians. All these programmes have relied upon the strategies of the Food for work programme and National Rural Employment Programme of the 1980s. under planning. more people can afford a bicycle than ever before. around $0. lived on less than 20 rupees per day[127] with most working in "informal labour sector with no job or social security. which attempted to use the unemployed to generate productive assets and build rural infrastructure.7% of the population lives on less than $2."[123] The average is 103 sq ft (9. down from 42.25 (PPP) per day.50 (PPP) a day. down from 92. with ownership rates ranging from around 30% to 70% at state level. The proportion of underweight children is nearly double that of Sub-Saharan Africa.25 in nominal terms) a day in 2005. The question of whether economic reforms have reduced poverty or not has fuelled debates without generating any clear cut answers and has also put political pressure on further economic reforms.5% in 1981. This compares with 80. successive governments have implemented various schemes. down from 59. especially those involving the downsizing of labour and cutting agricultural subsidies." and "one in every three urban Indians lives in homes too cramped to exceed even the minimum requirements of a prison cell in the US."[128] Since the early 1950s.[116][117][118][119][120] 24.[123] Around half of Indian children are malnourished. "a majority of Indians have per capita space equivalent to or less than a 10 feet x 10 feet room for their living. India has not had famines since the Green Revolution in the early 1970s.[129] In August 2005. the Indian parliament passed the Rural Employment Guarantee Bill. which promises 100 days of minimum wage employment to every rural household in 200 of India's 600 districts.6% and compares with 73.35 rupees a month in rural areas (around $7.1% in 1981.[116] 75.[122] Housing is still very modest. cooking. around 10 rupees in nominal terms) a day in 2004-2005.5 a day in nominal terms.6% of its population is living below the new international poverty line of $1. While poverty in India has reduced significantly.8% in 1981. which is around 20 rupees or $0. or 750 million people. official figures estimate that 27. the largest programme of this type in terms of cost and coverage.5% in Sub-Saharan Africa.6 m2) per person in rural areas and 117 sq ft (10. As of 2005: • • • • 85.[116][121] 41.0% in SubSaharan Africa. washing and toilet needs.5%[125] of Indians still lived below the national poverty line of $1 (PPP.

skill honing. but employment only at 2. Almost 30% of workers are casual workers who work only when they are able to get jobs and remain unpaid for the rest of the time. two-thirds of which are in the public sector. While agriculture has faced stagnation in growth. setting up public sector enterprises. etc. . Regulation and other obstacles have discouraged the emergence of formal businesses and jobs.[132] India's labor regulations are heavy even by developing country standards and analysts have urged the government to abolish them.2%) than urban areas (7.[8][133] Unemployment in India is characterized by chronic underemployment or disguised unemployment. reservations in governments.[129][134] Child labor is a complex problem that is basically rooted in poverty. The allocation of the Government of India for the eradication of child labor was $10 million in 1995-96 and $16 million in 1996-97. The decreased role of the public sector after liberalization has further underlined the need for focusing on better education and has also put political pressure on further reforms.5% annually. Numerous non-governmental and voluntary organizations are also involved.3%. 106 million.[135] In 2006.[136] Economic trends India's 300 million strong middle-class population is growing at an annual rate of 5%.[132] Official unemployment exceeds 9%.[137] Shown here is a residential area in the Mumbai metropolitan area.See also: Indian labour laws Agricultural and allied sectors accounted for about 60% of the total workforce in 2003 same as in 1993–94. 8% is in the organised sector.[132] Only 10% of the workforce is in regular employment. remittances from Indian migrants overseas made up $27 billion or about 3% of India's GDP.7%). The NSSO survey estimated that in 1999–2000. India's labor force is growing by 2. The Indian government is implementing the world's largest child labor elimination program. Special investigation cells have been set up in states to enforce existing laws banning employment of children (under 14) in hazardous industries. nearly 10% of the population were unemployed and the overall unemployment rate was 7. with rural areas doing marginally better (7. services have seen a steady growth. by providing financial assistance for setting up businesses. Of the total workforce. The allocation for 2007 is $21 million. Government schemes that target eradication of both poverty and unemployment (which in recent decades has sent millions of poor and unskilled people into urban areas in search of livelihoods) attempt to solve the problem.3% a year. with primary education targeted for ~250 million.

Overregulation of agriculture has increased costs. improve environmental quality. and that the Indian economy will surpass the United States (in US$) by 2043.[10] Despite high growth rate. 7. the report stated that India would continue to remain a lowincome country for several decades but can be a "motor for the world economy" if it fulfills its growth potential. India’s GDP per capita in US$ terms will quadruple". price risks and uncertainty. 5. Poorly maintained irrigation systems and almost universal lack of good extension services are among the factors responsible. improve governance raise educational achievement increase quality and quantity of universities control inflation introduce a credible fiscal policy liberalize financial markets increase trade with neighbours increase agricultural productivity improve infrastructure and 10. Current agricultural practices are neither economically nor environmentally sustainable and India's yields for many agricultural commodities are low. based on increased and sustaining growth. Farmers' access to markets is hampered by poor roads. . 3. 4. – World Bank: "India Country Overview 2008"[139] The low productivity in India is a result of the following factors: • According to "India: Priorities for Agriculture and Rural Development" by World Bank. 2. India's large agricultural subsidies are hampering productivity-enhancing investment. and excessive regulation. 8. 9.In the revised 2007 figures. more inflows into foreign direct investment. These are 1.[138] Issues Agriculture An Indian farmer Main article: Agriculture in India Slow agricultural growth is a concern for policymakers as some two-thirds of India’s people depend on rural employment for a living. Goldman Sachs predicts that "from 2007 to 2020.[10] Goldman Sachs has outlined 10 things that it needs to do in order to achieve its potential and grow 40 times by 2050. rudimentary market infrastructure. 6.

The average size of land holdings is very small (less than 20. Pakistan (86th). while a poor monsoon leads to a sluggish growth.000 villages to the Internet by 2013. . Adoption of modern agricultural practices and use of technology is inadequate. family disputes. Corruption has been one of the pervasive problems affecting India. high costs and impracticality in the case of small land holdings.[140] Irrigation facilities are inadequate. resulting in disguised unemployment and low productivity of labour. The irrigation infrastructure is deteriorating. which is the statutory apex agent for rural development in the subcontinent. India has many farm insurance companies that insure wheat.[140] Illiteracy. The economic reforms of 1991 reduced the red tape. behind countries such as China (83rd). One notable company that provides all of these insurance policies is Agriculture Insurance Company of India and it alone insures almost 20 million farmers.000 m²) and is subject to fragmentation. which should minimise losses incurred from neighbouring producers selling early and in turn facilitate investment in rural areas. Yet. specifically the Monsoon season.[141] which result in farmers still being dependent on rainfall. World Bank says that the allocation of water is inefficient.• • • • Government interventions in labor. that require government officials to furnish information requested by citizens or face punitive action. and Nigeria (108th). India's population is growing faster than its ability to produce rice and wheat. slow progress in implementing land reforms and inadequate or inefficient finance and marketing services for farm produce. Such small holdings are often over-manned. unsustainable and inequitable. Infrastructure and services are inadequate. Corruption Overview of the index of perception of corruption. and credit markets are hurting the market.[142] Farm credit is regulated by NABARD. a 2005 study by Transparency International (TI) India found that more than half of those surveyed had firsthand experience of paying bribe or peddling influence to get a job done in a public office.[144] The Right to Information Act (2005) and equivalent acts in the Indian states. rice and rubber farmers in the event of natural disasters or catastrophic crop failure. A good monsoon results in a robust growth for the economy as a whole. hampered by ignorance of such practices. fruit. bureaucracy and the Licence Raj that had strangled private enterprise and was blamed for the corruption and inefficiencies. under the supervision of the Ministry of Agriculture.6% of the land was irrigated in 2003–04. general socio-economic backwardness. 2007 Main article: Corruption in India India ranked 120th on the Ease of Doing Business Index 2008.[21] The most important structural reform for self-sufficiency is the ITC Limited plan to connect 20. due to land ceiling acts and in some cases.[143] This will provide farmers with up to date crop prices for the first time. land. as revealed by the fact that only 52.

8%) [155][156] Education Main article: Education in India India has made huge progress in terms of increasing primary education attendance rate and expanding literacy to approximately two thirds of the population.[129] The current government has concluded that most spending fails to reach its intended recipients. It is not unheard of that most state assembly seats are held by convicted criminals. Indian Road Network.[148] One study found out that 25% of public sector teachers and 40% of public sector medical workers could not be found at the workplace.[149][150][151][152] The Reserve Bank of India has warned that India's public-debt to GDP ratio is over 70%.[154] India's current public-debt to GDP ratio is 58.[147] The Economist's article about Indian civil service (2008) says that Indian central government employs around 3 million people and states another 7 million.[147] Million dollar bureaucracies can be run without a single computer in the management. Most children never attend secondary schools.computerisation of services and various central and state government acts that established vigilance commissions have considerably reduced corruption or at least have opened up avenues to redress grievances. States of India by installed power capacity.2% (US has 60. Ports in India.[158] Infrastructure See also: Transport in India.[144] The 2007 report by Transparency International ranks India at 72nd place and states that significant improvements were made by India in reducing corruption. including "vast armies of paper-shuffling peons". Electricity in India.[147] At local level. [147] Lant Pritchett calls India's public sector "one of the world's top ten biggest problems — of the order of AIDS and climate change". Private sector data relates to non-agriculture establishments with 10 or more employees. administration can be worse.[153] The government of India is highly indebted and its former investment-grade status has deteriorated near junk status. India's absence rates are one of the worst in the world. Water supply and sanitation in India. and Communications in India .[157] An optimistic estimate is that only one in five job-seekers in India has ever had any sort of vocational training. education is still far behind developing countries such as China. Totals are rounded.[145][146] Government Main article: Government of India See also: Taxation in India and Corruption in India The number of people employed in non-agricultural occupations in the public and private sectors.[157] However.

A World Bank report says it is an institutional problem in water agencies.000 bbl/day. This has prompted the government to partially open up infrastructure to the private sector allowing foreign investment[129][160][161] which has helped in a sustained growth rate of close to 9% for the past six quarters. electricity demand exceeded supply by 15%.[171] Most urban cities have good water supply water 24 hours a day.6 billion kWh with oil production standing at 785.[159] India's low spending on power.[163] Multi Commodity Exchange has tried to get a permit to offer electricity future markets."[172] Labour laws Main article: Indian labour laws India’s labor regulations — among the most restrictive and complex in the world — have constrained the growth of the formal manufacturing sector where these laws have their widest application.[163] While 80% of Indian villages have at least an electricity line. just 44% of rural households have access to electricity. at $31 billion or 6% of GDP in 2002 had prevented India from sustaining higher growth rates.[164][166] Almost all of the electricity in India is produced by the public sector. while some smaller cities face water shortages in summer season.[169] Container traffic is growing at 15% a year. Better designed labor regulations can attract more labor. As of 2005 the electricity production was at 661. Internet use is rare.[167] Indian Road Network is developing.[168] India has the world's second largest road network. In 2007.5% of GDP. transportation.[170] Some 60% of India’s container traffic is handled by the Jawaharlal Nehru Port Trust in Mumbai. urban-bias and an inability to scale investment.[165] Some half of the electricity is stolen. bureaucratic inefficiencies. compared with 3% in China. there were only 2. telecommunications and real estate. electricity was the main source of lighting for 53% of rural households compared to 36% in 1993. Development of infrastructure was completely in the hands of the public sector and was plagued by corruption. Shown here is the Mumbai-Pune expressway in Maharashtra. construction.[162] Some 600 million Indians have no mains electricity at all. or "how the agency is embedded in the relationships between politics and the citizens who are the consumers.1 million broadband lines in India in January 2007.[163] Many buy their own power generators to ensure electricity supply.Rapid increases in exports has resulted in congestion on highways across India. Trucking goods from Gurgaon to the port in Mumbai can take up to 10 days. Power outages are common.intensive investment and create jobs for India’s .882 households in 2002.[164] According to a sample of 97. The stolen electricity amounts to 1.

[172] The five-year plans have attempted to reduce regional disparities by encouraging industrial development in the interior regions.unemployed millions and those trapped in poor quality jobs. creating a stable platform for natural resource investment that balances business interests with social concerns.Bihar. poverty.[176] Between 1999 and 2008. Madhya Pradesh. establishing law and order. or Delhi (7.4%) compare well with middleincome countries. availability of infrastructure and socio-economic development. Given the country’s momentum of growth.4%). but industries still tend to concentrate around urban areas . the annualized growth rates for Gujarat (8.are home to more than half of India's population. or Madhya Pradesh (3.[172] On the other hand. Chhattisgarh. – World Bank: India Country Overview 2008[139] India's restrictive labor regulations hamper the large-scale creation of formal industrial jobs. Hundreds of people.[175] Seven low-income states .5%). and Uttar Pradesh . mostly comprising migrant labourers who come to the city seeking job prospects. rural Haryana (5.7%) and rural Punjab (2. Rajasthan.1%).[8][158] [173] Economic disparities Main article: Economic disparities in India Lagging states need to bring more jobs to their people by creating an attractive investment destination. Jharkhand.8%). Uttar Pradesh (4.4%) were much higher than for Bihar (5. the window of opportunity must not be lost for improving the job prospects for the 80 million new entrants who are expected to join the work force over the next decade. Orissa. improving rural connectivity. Kochi.[174] One of the critical problems facing India's economy is the sharp and growing regional variations among India's different states and territories in terms of per capita income. Reforming cumbersome regulatory procedures. reside in such shabby areas.[177] Poverty rates in rural Orissa (43%) and rural Bihar (40%) are some of the worst in the world. and providing rural finance are important. – World Bank: India Country Overview 2008[139] Slums next to high-rise commercial buildings in Kaloor. Haryana (8.7%).

compared with 67/100 for the region and 48/100 for the country income group.[182] Out of India's 3119 towns and cities.[183] Indoor air pollution from burning wood. greatly exceeding the 75 μg/m3 maximum standard for indoor particulate matter in the United States. which although being geographically and historically determined. The union and state governments of backward regions are trying to reduce the disparities by offering tax holidays. and focusing more on sectors like tourism. Particulate concentrations in houses are reported to range from 8.[185] . can become a source of growth and is faster to develop than other sectors. and only 8 have full wastewater treatment facilities (WHO 1992).[179][180] Environment and health Calicut Medical College. Water supply and sanitation in India. etc. just 209 have partial treatment facilities.[181] About 1. with infrastructure like well developed ports. and Healthcare in India On Yale and Columbia's Environmental Performance Index. India's score is 21/100 on sanitation.[184] 70% of rural households in India lack ventilation. coal and animal dung is widespread. This contributes to the rapid increase in waterborne diseases in humans. safe water because most household and industrial wastes are dumped directly into rivers and lakes without treatment. urbanisation and an educated and skilled workforce which attract manufacturing and service sectors.. Kerala Main articles: Environment of India.300 to 15. the more advanced states are better placed to benefit from them. cheap land.000 μg/m3.and port cities[178] After liberalization.2 billion people in developing nations lack clean.

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