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Naveen Doc 2003

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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]

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

3 Foreign direct investment in India 4 Currency 5 Income and consumption 6 Employment 7 Economic trends o 7.1.4 Natural resources 3 External trade and investment o 3.1.7 Economic disparities  7.1 Global trade relations o 3.1.1 Issues  7.1 Agriculture  7.6 Labour laws  7.4 Education  Balance of payments o 3.8 Environment and health o o History .5 Infrastructure  7.• • • • • • 1.4 After 1991 2 Sectors o 2.3 Independence to 1991 1.3 Government  7.2 Corruption  7.1.1 Agriculture o 2.1.2 Industry and services o 2.1.3 Banking and finance o 2.

a drainage system and water supply reveals their knowledge of urban planning. barter was prevalent. 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. The third period stretches from independence in 1947 until now. made tools and weapons.[27] . food processing and crafts. practiced agriculture.[25] The 1872 census revealed that 99. while its craftsmen received a part of the crops at harvest time for their services.[24] The citizens of the Indus Valley civilisation. domesticated animals. used uniform weights and measures.[26] whose economies were largely isolated and self-sustaining. such as textiles. a permanent and predominantly urban settlement that flourished between 2800 BC and 1800 BC.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. Although many kingdoms and rulers issued coins. which ended with independence in 1947. Evidence of well planned streets. Villages paid a portion of their agricultural produce as revenue to the rulers. which included the world's first urban sanitation systems and the existence of a form of municipal government.3% of the population of the region constituting present-day India resided in villages. and traded with other cities. This satisfied the food requirements of the village and provided raw materials for hand-based industries. with agriculture the predominant occupation. beginning with the pre-colonial period lasting up to the 17th century. The advent of British colonisation started the colonial period in the 17th century.

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

An estimate by Cambridge University historian Angus Maddison reveals that India's share of the world income fell from 22. and low rates for literacy. The impact of the British rule on India's economy is a controversial topic. a common-law and an adversarial legal system. with a strong emphasis on import substitution. telecommunications. on paper. among other industries. to a low of 3. were required to set up business in India between 1947 and 1990. India inherited an economy that was one of the poorest in the developing world. This was because of vast gains made by the Industrial revolution in Europe. industrialization.[37] India's colonisation by the British coincided with major changes in the world economy—industrialisation. state intervention in labor and financial markets.6% in 1700.3%. comparable to Europe's share of 23. insurance.8% in 1952. regulations and the accompanying red tape. mining.Nationalists employed the successful Swadeshi movement. Both started from about the same income level in 1950.[42] . the effects of which was deprived to Colonial India.[40] Five-Year Plans of India resembled central planning in the Soviet Union.[38] with industrial development stalled. However. It also established a well developed system of railways and telegraphs. 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. 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. as strategy to diminish British economic superiority by boycotting British products and the reviving the market for domesticmade products and production techniques. 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. Leaders of the Indian independence movement. a large public sector. and central planning. The graph shows GDP per capita of South Asian economies and South Korea as a percent of the American GDP per capita.[36] It also created an institutional environment that. encouraged free trade. machine tools. guaranteed property rights among the colonizers. business regulation. 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. at the end of colonial rule. commonly referred to as Licence Raj. India had become a strong market for superior finished European goods. capital markets. and created a single currency with fixed exchange rates. were effectively nationalized in the mid-1950s. water. agriculture unable to feed a rapidly growing population.[39] Independence to 1991 Compare India (orange) with South Korea (yellow).[41] Elaborate licences. and electrical plants. and significant growth in production and trade. Policy tended towards protectionism. India had one of the world's lowest life expectancies. a civil service that aimed to be free from political interference. Steel. standardized weights and measures.

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

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

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

860 or 22% of the total number of branches in 1969 to 32. but growing at double digits. Since then.270 out of 5 lakh (500.000) villages are covered by a scheduled bank. Shown here is the World Trade Center of Mumbai Prime Minister Indira Gandhi nationalised 14 banks in 1969. especially for nonproductive purposes. retail trade. small-scale industry. and made it mandatory for banks to provide 40% of their net credit to priority sectors like agriculture. etc.2% and 6. the number of bank branches has increased from 10. followed by six others in 1980.[79][80] The public sector banks hold over 75% of total assets of the banking industry. Number of banks are in brackets. The unorganised sector and microcredit are still preferred over traditional banks in rural and sub-urban areas.800 to 15. from states. There are taxes for moving goods to states. like ceremonies and short duration loans. Organized retail such supermarkets accounts for just 4% of the market as of 2008. Moreover. While some of these relate to nationalised banks (like .270 or 48%. public and foreign owned commercial banks and cooperative banks.000 during the same period. with the private and foreign banks holding 18. only 32. the government has approved significant banking reforms. to ensure that the banks fulfill their social and developmental goals.120 in 1969 to 98.Most Indian shopping takes place in open markets and millions of independent grocery shops called kirana. Despite an increase of rural branches. The total deposits increased 32.[75] Tourism in India is relatively undeveloped. [75] Regulations prevent most foreign investment in retailing. from 1. small businesses.5% respectively. together known as scheduled banks). over thirty regulations such as "signboard licences" and "anti-hoarding measures" may have to be complied before a store can open doors.[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.[77] The Indian money market is classified into: the organised sector (comprising private.910 in 2003 and the population covered by a branch decreased from 63.6 times between 1971 to 1991 compared to 7 times between 1951 to 1971. and the unorganised sector (comprising individual or family owned indigenous bankers or money lenders and non-banking financial companies (NBFCs)).[78] Mumbai is the financial and commercial capital of India. Some hospitals woo medical tourism.[81] Since liberalisation. and even within states.

Gujarat. canals. chromite.[14][82] More than half of personal savings are invested in physical assets such as land. Tamil Nadu. limestone and thorium. While some of these relate to nationalised banks (like encouraging mergers. the government has approved significant banking reforms.1 billion barrels[88] and Mangala Area in Rajasthan an additional 3. cattle. other reforms have opened up the banking and insurance sectors to private and foreign players.[90] However. Shown here is a wind farm in Muppandal. and is expected to rise to 1. and gold.[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. India meets most of its domestic energy demand through its 92 billion tonnes of coal reserves (about 10% of world's coal reserves). India had the world's third largest fishing industry. iron.100 mm. Irrigation accounts for 92% of the water utilisation. manganese.[87] of which Bombay High is believed to hold 6.encouraging mergers. the Indo-US nuclear deal has paved the way for India to import uranium from other .[84] India's major mineral resources include coal. titanium. reducing government interference and increasing profitability and competitiveness). and comprised 380 km² in 1974.050 km² by 2025. reducing government interference and increasing profitability and competitiveness).400 km² and receives an average annual rainfall of 1. other reforms have opened up the banking and insurance sectors to private and foreign players.78% of total land area). mica.6 billion barrels.587 MW.[14][86] India's total proven oil reserves stand at 11 billion barrels. found in Bombay High off the coast of Maharashtra. bauxite. houses. India has a total water surface area of 314. India's total cultivable area is 1. which is decreasing due to constant pressure from an ever growing population and increased urbanisation.219 km² (56. Rajasthan and in eastern Assam meet 25% of the country's domestic oil demand. 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. with an installed wind power capacity of 9. with the balance accounted for by industrial and domestic consumers. India's inland water resources comprising rivers.[14][82] Since liberalisation.[85] India's oil reserves.269. In 2008.[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. India's dwindling uranium reserves stagnated the growth of nuclear energy in the country for many years.

The restrictions ensured that FDI averaged only around US$200 million annually between 1985 and 1991. the UK. jute and cotton manufactures. India's major trading partners are China. the value of India's international trade has become more broad-based and has risen to Rs. the WTO. export taxes and quantitative restrictions. India's economy is mostly dependent on its large internal market with external trade accounting for just 20% of the country's GDP. wind and biofuels (jatropha. India accounted for 1.countries. machinery. electronic goods.31 billion up by 16% and import were $17.[92] Shown here is the cargo of a container ship being unloaded at the Jawaharlal Nehru Port. India's annual imports and exports stood at US$236 and US$155. gold and silver.250 crores in 1950–51. these approvals were needed for nearly 60% of new FDI in the industrial sector. commercial borrowing and deposits of non-resident Indians.[97] In 2006-07. a large percentage of the capital flows consisted of foreign aid. gems and jewellery.080. while foreign direct investment (FDI) was restricted by upper-limit equity participation. Imports in the same period consisted predominantly of machinery. chemicals and pharmaceuticals. External trade and investment Further information: Globalisation in India Global trade relations In March 2008.68 billion with an increase of 18. to protect its economy and to achieve self-reliance.06% over the previous year. iron ore and other minerals.[96] The exports during April 2007 were $12. petroleum products.5 billion respectively. textiles and garments. the UAE. due to the predominance of tea. 63.[94] Until the liberalization of 1991. agricultural products. Navi Mumbai. export obligations and government approvals. Since liberalization.1. While participating actively in its general council meetings. India was largely and intentionally isolated from the world markets.109 crores in 2003–04 from Rs.8% of global commercial services export. the US.[95] India's exports were stagnant for the first 15 years after independence.45% of global merchandise trade and 2. restrictions on technology transfer. demand for which was generally inelastic. due to nascent industrialization.[91] India is also believed to be rich in certain renewable sources of energy with significant future potential such as solar.[98] India is a founding-member of General Agreement on Tariffs and Trade (GATT) since 1947 and its successor. Japan and the EU. major export commodities included engineering goods. sugarcane). India has . Foreign trade was subject to import tariffs. Major import commodities included crude oil and related products.[93] In 2008. equipment and raw materials.

India's balance of payments on its current account has been negative. it has gradually been repaying these debts.e.[101] Although India is still a net importer.[104] In India. largely on account of increased foreign direct investment and deposits from non-resident Indians. both Indian exports and imports declined by 29. more than 3/4th of the domestic demand. As a result. India has continued its opposition to the inclusion of such matters as labour and environment issues and other nontariff barriers into the WTO policies. until this time. For instance. since 1996–97 its overall balance of payments (i.[102] India's reliance on external assistance and commercial borrowings has decreased since 1991–92. (2000–2007)[106] Inflows (Million USD) 85.[99] Balance of payments Cumulative Current Account Balance 1980-2008 based on the IMF data Since independence. India imported 120. since the decline in imports was much sharper compared to the decline in exports. which could be used in infrastructural development of the country if used effectively. at a cost of $61.178 Rank Country Inflows (%) 1 Mauritius 44.72 billion.. account for more than 60% of Indian exports. and since 2002–03.1 million tonnes of crude oil. up from 66.[105] Foreign direct investment in India Share of top five investing countries in FDI inflows.[103] However.2% and 39. India's exports have been consistently rising. India's foreign currency reserves stood at $285 billion in 2008. Since liberalisation in the 1990s (precipitated by a balance of payment crisis).[100] In 2007-08. India's growing oil import bill is seen as the main driver behind the large current account deficit.2% in 1990–91.5 billion.24%[107] . Due to the global late-2000s recession.2% respectively in June 2009. Declining interest rates and reduced borrowings decreased India's debt service ratio to 4. the overall balance was only occasionally positive on account of external assistance and commercial borrowings.[102] The steep decline was because countries hit hardest by the global recession.3% of its imports in 2002–03.been crucial in voicing the concerns of the developing world. External Commercial Borrowings (ECBs) are being permitted by the Government for providing an additional source of funds to Indian corporates. India's trade deficit reduced to $252. The Ministry of Finance monitors and regulates these borrowings (ECBs) through ECB policy guidelines. such as United States and members of the European Union.5% in 2007. including the capital account balance) has been positive. covering 80.

98% 5. petroleum and natural gas.[108] India has a large pool of skilled managerial and technical expertise. The FDI inflow for 2007-08 has been reported as $24 billion[111] and for 2008-09. Fields which require relaxation in FDI restrictions include civil aviation. FDI inflows into India reached a record $19.177 9. the government amended the rules to allow 100 per cent FDI in the construction business. rigid FDI policies resulted in a significant hindrance.[110] This automatic route has been permitted in townships.37% 7. built-up infrastructure and construction development projects including housing.[108] India has strengths in information technology and other significant areas such as auto components. according to the government's Secretariat for Industrial Assistance. Industrial policy reforms have substantially reduced industrial licensing requirements.5 billion in fiscal year 2006-07 (April-March).[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. commodity exchanges.742 9. and jewellery. pharmaceuticals. and city. Despite a surge in foreign investments. industrial parks. India is a preferred destination for foreign direct investments (FDI). chemicals. due to some positive economic reforms aimed at deregulating the economy and stimulating foreign investment. housing.363 11. removed restrictions on expansion and facilitated easy access to foreign technology and foreign direct investment FDI. it is expected to be above $35 billion. construction development. However. creditinformation services and mining.[113] . hotels. recreational facilities.and regional-level infrastructure. resorts.[109] India's recently liberalized FDI policy (2005) allows up to a 100% FDI stake in ventures. The size of the middle-class population stands at 50 million and represents a growing consumer market. This was more than double the total of US$7. The upward moving growth curve of the real-estate sector owes some credit to a booming economy and liberalized FDI regime. India has positioned itself as one of the front-runners of the rapidly growing Asia Pacific Region.8bn in the previous fiscal year. In March 2005.2 3 4 5 United States United Kingdom Netherlands Singapore 18. But this still leaves an unfinished agenda of permitting greater foreign investment in politically sensitive areas such as insurance and retailing.040 15. A number of changes were approved on the FDI policy to remove the caps in most sectors. educational institutions. commercial premises. hospitals.06% As the fourth-largest economy in the world in PPP terms. apparels.81% 5.

Reserve Bank of India.000 rupee note. 5. both of which peg their currency to that of the Indian rupee. India inherited several institutions. The RBI is governed by a central board.[114] 66. Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) located here. the lowest-denomination coin in circulation is the 25 paise coin (it earlier had 1. The Indian rupee is accepted as legal tender in the neighboring Nepal and Bhutan. as foreign institutional investors sold $14 billion worth of Indian stocks in 2008 and invested in US treasury bonds. regulator and supervisor of the financial system. railways.[115] There has been a recent fall in the value of the Rupee as a result of the global financial crisis of 2008. The exchange rate as of September 1. The rupee is divided into 100 paise. manager of exchange control and as an issuer of currency.2009 is 49.60 to a UK pound. Income and consumption Main article: Income in India . Mumbai serves as the nation's commercial capital. with the Reserve Bank of India (RBI). and 77. The headquarters of many financial institutions are also located in the city. etc. The RBI.0003 rupees to a US dollar. It serves as the nation's monetary authority. from its British rulers.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. headed by a governor who is appointed by the Central government of India. The highestdenomination banknote is the 1..65 to a Euro. 1935. such as the civil services. the country's central bank was established on April 1. 2. 10 and 20 paise coins which have been discontinued by the Reserve Bank of India).

6% and compares with 73.5% in Sub-Saharan Africa. Some 40% of Indian households owns a bicycle. around 10 rupees in nominal terms) a day in 2004-2005. with ownership rates ranging from around 30% to 70% at state level. under planning. which is around 20 rupees or $0. lived on less than 20 rupees per day[127] with most working in "informal labour sector with no job or social security."[123] The average is 103 sq ft (9. the Indian parliament passed the Rural Employment Guarantee Bill.Percentage of population living under the poverty line of $1 (PPP) a day. especially those involving the downsizing of labour and cutting agricultural subsidies. living in abject poverty.[116] 75. sleeping. "a majority of Indians have per capita space equivalent to or less than a 10 feet x 10 feet room for their living.[116] The World Bank further estimates that a third of the global poor now reside in India.5% in 1981.4 a month). India has not had famines since the Green Revolution in the early 1970s. successive governments have implemented various schemes.25 (PPP) per day.[22][124] However.3% of the population earned less than $1 (PPP. down from 59.[116][117][118][119][120] 24. which attempted to use the unemployed to generate productive assets and build rural infrastructure.5 a day in nominal terms. official figures estimate that 27."[128] Since the early 1950s. washing and toilet needs. 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. more people can afford a bicycle than ever before. down from 92.25 in nominal terms) a day in 2005. around $0. Today.6 m2) per person in rural areas and 117 sq ft (10. According to Times of India. the largest programme of this type in terms of cost and coverage.[130][131] Employment . While poverty in India has reduced significantly.6% of the population lives on less than $2 a day (PPP). All these programmes have relied upon the strategies of the Food for work programme and National Rural Employment Programme of the 1980s.1% in 1981. This compares with 80. to alleviate poverty." 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.8% in 1981.[122] Housing is still very modest.[116][121] 41. which promises 100 days of minimum wage employment to every rural household in 200 of India's 600 districts. cooking. The proportion of underweight children is nearly double that of Sub-Saharan Africa.6% of its population is living below the new international poverty line of $1. down from 42.5%[125] of Indians still lived below the national poverty line of $1 (PPP.7% of the population lives on less than $2.35 rupees a month in rural areas (around $7. currently 356.0% in SubSaharan Africa. or 750 million people.[126] A 2007 report by the state-run National Commission for Enterprises in the Unorganised Sector (NCEUS) found that 65% of Indians. It was down from 86.[123] Around half of Indian children are malnourished.50 (PPP) a day.[129] In August 2005. As of 2005: • • • • 85. that have met with partial success.9 m2) per person in urban areas.

[132] Only 10% of the workforce is in regular employment. 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.[132] India's labor regulations are heavy even by developing country standards and analysts have urged the government to abolish them. remittances from Indian migrants overseas made up $27 billion or about 3% of India's GDP. The Indian government is implementing the world's largest child labor elimination program. India's labor force is growing by 2. by providing financial assistance for setting up businesses.[135] In 2006.[132] Official unemployment exceeds 9%. The allocation for 2007 is $21 million. reservations in governments. .[8][133] Unemployment in India is characterized by chronic underemployment or disguised unemployment. nearly 10% of the population were unemployed and the overall unemployment rate was 7.[137] Shown here is a residential area in the Mumbai metropolitan area.3%. but employment only at 2. While agriculture has faced stagnation in growth. 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. setting up public sector enterprises.2%) than urban areas (7. skill honing.5% annually. The NSSO survey estimated that in 1999–2000. Special investigation cells have been set up in states to enforce existing laws banning employment of children (under 14) in hazardous industries.[129][134] Child labor is a complex problem that is basically rooted in poverty.7%). with primary education targeted for ~250 million. Numerous non-governmental and voluntary organizations are also involved. two-thirds of which are in the public sector. 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. Of the total workforce. 106 million.[136] Economic trends India's 300 million strong middle-class population is growing at an annual rate of 5%. services have seen a steady growth.See also: Indian labour laws Agricultural and allied sectors accounted for about 60% of the total workforce in 2003 same as in 1993–94.3% a year. 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. etc. Regulation and other obstacles have discouraged the emergence of formal businesses and jobs. with rural areas doing marginally better (7. 8% is in the organised sector.

6. Farmers' access to markets is hampered by poor roads. These are 1. India’s GDP per capita in US$ terms will quadruple". 3.[10] Despite high growth rate. 9. and that the Indian economy will surpass the United States (in US$) by 2043. 2.[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. improve environmental quality. based on increased and sustaining growth. 8. price risks and uncertainty. 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. 7. 4.[10] Goldman Sachs has outlined 10 things that it needs to do in order to achieve its potential and grow 40 times by 2050. India's large agricultural subsidies are hampering productivity-enhancing investment. rudimentary market infrastructure. – 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. . 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. Overregulation of agriculture has increased costs. and excessive regulation. Current agricultural practices are neither economically nor environmentally sustainable and India's yields for many agricultural commodities are low. more inflows into foreign direct investment. Poorly maintained irrigation systems and almost universal lack of good extension services are among the factors responsible. 5.In the revised 2007 figures. Goldman Sachs predicts that "from 2007 to 2020.

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

including "vast armies of paper-shuffling peons". Electricity in India. India's absence rates are one of the worst in the world.2% (US has 60.8%) [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. Indian Road Network.[144] The 2007 report by Transparency International ranks India at 72nd place and states that significant improvements were made by India in reducing corruption.[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.[154] India's current public-debt to GDP ratio is 58. [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".[158] Infrastructure See also: Transport in India. Ports in India.[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. education is still far behind developing countries such as China. Private sector data relates to non-agriculture establishments with 10 or more employees.[149][150][151][152] The Reserve Bank of India has warned that India's public-debt to GDP ratio is over 70%. It is not unheard of that most state assembly seats are held by convicted criminals.[153] The government of India is highly indebted and its former investment-grade status has deteriorated near junk status.[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. and Communications in India .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.[129] The current government has concluded that most spending fails to reach its intended recipients.[157] However. States of India by installed power capacity. administration can be worse. Totals are rounded.[147] At local level.[147] Million dollar bureaucracies can be run without a single computer in the management. Most children never attend secondary schools.[157] An optimistic estimate is that only one in five job-seekers in India has ever had any sort of vocational training. Water supply and sanitation in India.

The stolen electricity amounts to 1. while some smaller cities face water shortages in summer season.882 households in 2002. transportation.[163] While 80% of Indian villages have at least an electricity line.intensive investment and create jobs for India’s .1 million broadband lines in India in January 2007. Power outages are common. 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. Shown here is the Mumbai-Pune expressway in Maharashtra. at $31 billion or 6% of GDP in 2002 had prevented India from sustaining higher growth rates.[169] Container traffic is growing at 15% a year.5% of GDP. compared with 3% in China. there were only 2. just 44% of rural households have access to electricity.[163] Multi Commodity Exchange has tried to get a permit to offer electricity future markets.000 bbl/day.[164] According to a sample of 97. As of 2005 the electricity production was at 661. electricity demand exceeded supply by 15%. Trucking goods from Gurgaon to the port in Mumbai can take up to 10 days.[170] Some 60% of India’s container traffic is handled by the Jawaharlal Nehru Port Trust in Mumbai.[171] Most urban cities have good water supply water 24 hours a day. Development of infrastructure was completely in the hands of the public sector and was plagued by corruption.[159] India's low spending on power.[162] Some 600 million Indians have no mains electricity at all. A World Bank report says it is an institutional problem in water agencies.[164][166] Almost all of the electricity in India is produced by the public sector.[168] India has the world's second largest road network. urban-bias and an inability to scale investment.[163] Many buy their own power generators to ensure electricity supply.Rapid increases in exports has resulted in congestion on highways across India. In 2007. construction. bureaucratic inefficiencies. telecommunications and real estate."[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. electricity was the main source of lighting for 53% of rural households compared to 36% in 1993.[167] Indian Road Network is developing. or "how the agency is embedded in the relationships between politics and the citizens who are the consumers.[165] Some half of the electricity is stolen. Internet use is rare.6 billion kWh with oil production standing at 785. Better designed labor regulations can attract more labor.

but industries still tend to concentrate around urban 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. Rajasthan. – World Bank: India Country Overview 2008[139] Slums next to high-rise commercial buildings in Kaloor.[172] On the other hand. availability of infrastructure and socio-economic development.[175] Seven low-income states . rural Haryana (5.[172] The five-year plans have attempted to reduce regional disparities by encouraging industrial development in the interior regions. Orissa. reside in such shabby areas.Bihar. establishing law and order. Uttar Pradesh (4.4%) were much higher than for Bihar (5.1%).4%) compare well with middleincome countries.[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. and Uttar Pradesh . Jharkhand.[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. Given the country’s momentum of growth.are home to more than half of India's population. Hundreds of people. 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.[176] Between 1999 and 2008. the annualized growth rates for Gujarat (8.7%) and rural Punjab (2.8%). Chhattisgarh. Kochi. Reforming cumbersome regulatory procedures.4%).7%).unemployed millions and those trapped in poor quality jobs. or Delhi (7.5%). – World Bank: India Country Overview 2008[139] India's restrictive labor regulations hamper the large-scale creation of formal industrial jobs. Haryana (8. Madhya Pradesh. improving rural connectivity. or Madhya Pradesh (3. poverty. mostly comprising migrant labourers who come to the city seeking job prospects. creating a stable platform for natural resource investment that balances business interests with social concerns.

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

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