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The Indian Economy

The Indian Economy

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Published by: Vinod Dhone on May 05, 2011
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The Economy of India is the eleventh largest in the world by nominal GDP and the fourth largest by purchasing

power parity (PPP). The country's per capita GDP (PPP) is $3,176 (IMF, 127th) in 2009. Following strong economic reforms from the socialist inspired economy of a post-independence Indian nation, the country began to develop a fast-paced economic growth, as free market principles were initiated in 1990 for international competition and foreign investment. Economists predict that by 2020, India will be among the leading economies of the world. India's top five trade partnersare UAE, China, USA, Saudi Arabia and Germany. India was under social democratic-based policies from 1947 to 1991. The economy was characterised by extensive regulation, protectionism, public ownership, pervasive corruption and slow growth. Since 1991, continuing economic liberalisation has moved the country toward a market-based economy. A revival of economic reforms and better economic policy in first decade of the 21st century accelerated India'seconomic growth rate. In recent years, Indian cities have continued to liberalise business regulations. By 2008, India had established itself as the world's second-fastest growing major economy. However, as a result of the financial crisis of 2007±2010, coupled with a poor monsoon, India's gross domestic product (GDP) growth rate significantly slowed to 6.7% in 2008±09, but subsequently recovered to 7.2% in 2009±10, while thefiscal deficit rose from 5.9% to a high 6.5% during the same period. India's large service industry accounts for 57.2% of the country's GDP while the industrial and agricultural sector contribute 28% and 14.6% respectively. Agricultureis the predominant occupation in India, accounting for about 52% of employment. Theservice sector makes up a further 34%, and industrial sector around 14%. The labour force totals half a billion workers. Major agricultural products include rice, wheat, oilseed,cotton, jute, tea, sugarcane, potatoes, cattle, water buffalo, sheep, goats, poultry andfish. Major industries include telecommunications, textiles, chemicals, food processing, steel, transportation equipment, cement, mining, petroleum, machinery, information technology-enabled services and pharmaceuticals. However, statistics from a 2009-10 government survey, which used a smaller sample size than earlier surveys, suggested that the share of agriculture in employment had dropped to 45.5%. Previously a closed economy, India's trade has grown fast India currently accounts for 1.5% of world trade as of 2007 according to the WTO. According to the World Trade Statistics of the WTO in 2006, 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. Thus, India's global economic engagement in 2006 covering both merchandise and services trade was of the order of $437 billion, up by a record 72% from a level of $253 billion in 2004. India's total trade in goods and services has reached a share of 43% of GDP in 2005±06, up from 16% in 1990±91

India is witnessing unprecedented growth in its black money economy.[71] . is 16th in the world in terms of nominal factory output. Business process outsourcing in India. liberalised the FDI regime.[68] Industry accounts for 28% of the GDP and employ 14% of the total workforce.The Indian economy continues to face the problem of an underground economy with credible sources saying that India tops the list for black money in the entire world with almost $1. brought in foreign competition. this has also reduced employment generation even by smaller manufacturers who earlier relied on relatively labour-intensive processes.[67] Shown here is the Tata Motors' Nano. the Indian private sector was faced with increasing domestic as well as foreign competition. If this had not happened. Indian economy has been losing 5 per cent of its GDP over the last 30 years because of black money sent outside. in turn. including the threat of cheaper Chinese imports.4 trillion). [69] [17] In absolute terms. India has more black money than rest of the world combined. the world's cheapest car.[70] Post-liberalisation. India would have been the world¶s second largest economy after the United States. now estimated to constitute an alarming 50 per cent of the country¶s GDP. It has since handled the change by squeezing costs. which removed import restrictions. means that 32 to 35 lakh crore (USD 900 billion or approximately USD 1 trillion) is generated in this parallel economy every year. say experts. led to privatisation of certain public sector industries. This. improved infrastructure and led to an expansion in the production of fast moving consumer goods. and Retailing in India India has one of the world's fastest growing automobile industries. India The Indian industrial sector underwent significantly changes as a result of the economic reforms of 1991. However. revamping management.456 billion in Swiss banks (USD 1. Sectors [edit]Industry and services See also: Information technology in India. According to the data provided by the Swiss banks. and relying on cheap labour and new technology.

on the supply side. gypsum. and even within states. fluorite. with the country producing 79 different minerals (excluding fuel and atomic resources) in 2009±10. phosphoriteand si lica sand. seven Indian firms were listed among the top 15 technology outsourcing companies in the world. but highly skilled. [74] The growth in the IT sector is attributed to increased specialisation. over thirty regulations such as "signboard licences" and "antihoarding measures" may have to be complied before a store can open doors. up from 4. manganese.[75] In 2009. bauxite.[79] [edit]Agriculture . It has the largest share in the GDP. with a growth rate of 7. mica. up from 15% in 1950. India is fifteenth in services output. and an availability of a large pool of low cost. having a cumulative growth rate of revenue 33.6% between 1997±98 and 2002±03 and contributing to 25% of the country's total exports in 2007±08. but growing at double digits. limestone. asbestos. [72] Ludhianaproduces 90% of [73] woollens in India and is known as the Manchester of India. [17] Information technology and business process outsourcing are among the fastest growing sectors. or those looking to outsource their operations. providing employment to over 20 million people.[76] Tourism in India is relatively undeveloped. This is matched on the demand side by an increased demand from foreign consumers interested in India's service exports. Moreover.5% in 1951±80. There are taxes for moving goods from state to state.5% in 1991±2000. The services sector provides employment to 23% of the work force and is growing quickly.[77] Organised retail supermarkets accounts for 24% of the market as of 2008. chromite. Tirupur has gained universal recognition as the leading source of hosiery. The share of the Indian IT industry in the country's GDP increased from 4. knitted garments.[78] Regulations prevent most foreign investment in retailing. ochre. Some hospitals woo medical tourism.[78] Mining forms an important segment of the Indian economy. educated and fluent English-speaking workers.8 % in 2005±06 to 7% in 2008. accounting for 55% in 2007. casual wear and sportswear.Textile manufacturing is the second largest source of employment after agriculture and accounts for 20% of manufacturing output. including iron ore.

accounting for 10. and Fishing in India See also: Natural resources in India India ranks second worldwide in farm output. and despite a steady decline of its share in the GDP. Agriculture and allied sectors like forestry. 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 six million people in the fisheries sector. technology. as well as the second largest fruit and vegetable producer.130 sq mi) of the land area.[86] India is the largest producer in the world of milk. [80]and Andhra Pradesh is the second largest rice producing state in India with West Bengal being the largest. including surface and groundwater.[83] India receives an average annual rainfall of 1.000 million tons in 2005. jute and pulses. [87] [80] India is also the second largest producer and the largest consumer of silk in the world. application of modern agricultural practices and provision of agricultural credit and subsidies since the Green Revolution in India. sugarcane. employed 52. is still the largest economic sector and a significant piece of the overall socio-economic development of India. which includes individual or family owned indigenous bankers or money lenders and non-banking financial companies. producing 77. Forestry in India. together known as scheduled banks. or about 39% of the total cultivated area. public and foreign owned commercial banks andcooperative banks.[80] It is the second largest producer of rice.7% of the GDP in 2009±10.9% and 8.6 in) and a total annualprecipitation of 4000 billion cubic metres. wheat. international comparisons reveal the average yield in India is generally 30% to 50% of the highest average yield in the world. due to the special emphasis placed on agriculture in the five-year plans and steady improvements in irrigation. India is the second largest producer of rice in the world after China. canals.1% of the total workforce.6% of the world fruit and vegetable production respectively. [edit]Banking and finance Main article: Finance in India See also: Banking in India and Insurance in India The Indian money market is classified into the organised sector. However. Animal husbandry in India.[81] Main articles: Agriculture in India.[84] 546. and also has the world's second largest cattle population with 175 million animals in 2008. India had the world's third largest fishing industry. amounting to 1123 billion cubic metres. cotton and groundnuts.208 millimetres (47.820 square kilometres (211. and the unorganised sector. In 2008.[82] Yields per unit area of all crops have grown since 1950. with the total utilisable water resources.[88] The unorganised sector and microcredit are still . is irrigated.Farmers work inside a rice field inAndhra Pradesh.[85] India's inland water resources including rivers. loggingand fishing accounted for 15. comprising private.

cattle.1 billion worth of oil in the first three quarters .260 in 1969 to 72.28 billion) in 1970±71 to 3. small businesses. small-scale industry.170 in 2007 and the population covered by a branch decreased from 63. one of the few sites of domestic production. Gujarat andRajasthan. etc. with the private and foreign banks holding 18. like ceremonies and short duration loans. and gold. like encouraging mergers.[98] Oil and natural gas fields are located offshore at Mumbai High. followed by six others in 1980.830.910 crore (US$1.922 crore (US$831. India imported about 70% of its crude oil requirements. The total deposits increased from 5. and made it mandatory for banks to provide 40% of their net credit to priority sectors like agriculture. other reforms have opened up the banking and insurance sectors to private and foreign players. especially for non-productive purposes. India's oil reserves meet 25% of the country's domestic oil demand. [89] Prime Minister Indira Gandhi nationalised 14 banks in 1969.5% respectively. to ensure that the banks fulfill their social and developmental goals. reducing government interference and increasing profitability and competitiveness.[17][95] [edit]Energy and power Main article: Energy policy of India As of 2010. Despite an increase of rural branches. [90][91] India's gross domestic saving in 2006±07 as a percentage of GDP stood at a high 32.590 or 42% in 2007. only 32.7%. houses.31 billion) in 2008±09. While some of these relate to nationalised banks.[94] Since liberalisation. Since then.000 villages are covered by a scheduled bank. [98] India is the fourth largest consumer of oil in the world and imported $82.[17][97] As of 2009. Krishna Godavari Basin and the Cauvery Delta. retail trade. the number of bank branches has increased from 8.270 out of 500.[92] More than half of personal savings are invested in physical assets such as land.[96] Shown here is an ONGC platform at Mumbai High in theArabian Sea. the government has approved significant banking reforms.[93] The public sector banks hold over 75% of total assets of the banking industry. and onshore mainly in the states of Assam. India's total proven oil reserves stood at 775 million metric tonnes while gas reserves stood at 1074 billion cubic metres. from 1.2% and 6.000 during the same period.800 to 15.preferred over traditional banks in rural and sub-urban areas.860 or 22% of the total number of branches in 1969 to 30.

[103] .6%. of which thermal power contributed 64.[101] India is also rich in certain renewable sources of energy with significant future potential such as solar. As of 2010.[100] India meets most of its domestic energy demand through its 106 billion tonnes of coal reserves. India's huge thorium reserves ² about 25% of world's reserves ² are expected to fuel the country's ambitious nuclear energy program in the long-run. India had an installed power generation capacity of 164. with an installed wind power capacity of 9. wind and biofuels (jatropha.7%. [99] India has the world's fifth largest wind power industry.9%. India's dwindling uranium reserves stagnated the growth of nuclear energy in the country for many years. and nuclear power 2.7%. [96] The petroleum industry in India mostly consists of public sector companies such as Oil and Natural Gas Corporation (ONGC).of 2010.835 megawatts (MW).[102] However. Tamil Nadu.587 MW. other sources of renewable energy 7. hydroelectricity 24. sugarcane). Shown here is a wind farm in Muppandal. Hindustan Petroleum Corporation Limited (HPCL) and Indian Oil Corporation Limited (IOCL). There are some major private Indian companies in the oil sector such as Reliance Industries Limited (RIL) which operates the world's largest oil refining complex. which had an adverse effect on its current account deficit. the Indo-US nuclear deal has paved the way for India to import uranium from other countries.

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