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org/wiki/Economy_of_India#Socio-economic_characteristics The economy of India is the third largest in the world as measured by purchasing power parity (PPP). When measured in USD exchange-rate terms, it is the twelfth largest in the world, with a GDP of US $1.0 trillion (2007).[1] India is the second fastest growing major economy in the world, with a GDP growth rate of 9.4% for the fiscal year 2006–2007.[2] However, India's huge population results in a per capita income of $4,031 at PPP and $885 at nominal (2007 estimate).[3] The World Bank classifies India as a low-income economy.[4] [5] India's economy is diverse and encompasses agriculture, handicrafts, textile, manufacturing, and a multitude of services. Although two-thirds of the Indian workforce still earn their livelihood directly or indirectly through agriculture, services are a growing sector and are playing an increasingly important role of India's economy. The advent of the digital age, and the large number of young and educated populace fluent in English, is gradually transforming India as an important 'back office' destination for global companies for the outsourcing of their customer services and technical support. India is a major exporter of highly-skilled workers in software and financial services, and software engineering. Other sectors like manufacturing, pharmaceuticals, biotechnology, nanotechnology, telecommunication, shipbuilding, aviation and tourism are showing strong potentials with higher growth rates. India followed a socialist-inspired approach for most of its independent history, with strict government control over private sector participation, foreign trade, and foreign direct investment. However, since the early 1990s, India has gradually opened up its markets through economic reforms by reducing government controls on foreign trade and investment. The privatisation of publicly owned industries and the opening up of certain sectors to private and foreign interests has proceeded slowly amid political debate. India faces a burgeoning population and the challenge of reducing economic and social inequality. Poverty remains a serious problem, although it has declined significantly since independence, mainly due to the green revolution and economic reforms. External trade and investment
Share of top five investing countries in FDI inflows. (1991–2004)[77] Share of top five investing countries in FDI 2004)[77] Inflows Rank Country (Million USD) 1 8,898 Mauritius 2 United States 4,389 3 1,891 Japan 4 1,847 Netherlands 5 United Kingdom 1,692 inflows. (1991– Inflows (%) 34.49%[78] 17.08% 7.33% 7.16% 6.56%

Global trade relations
Until the liberalisation of 1991, India was largely and intentionally isolated from the world markets, to protect its fledging economy and to achieve self-reliance. Foreign trade was subject to import tariffs, export taxes and quantitative restrictions, while foreign direct investment was restricted by upper-limit equity participation, restrictions on technology transfer, export obligations and government approvals; these approvals were needed for nearly 60% of new FDI in the industrial sector. The restrictions ensured that FDI averaged only around $200M annually between 1985 and 1991; a large percentage of the capital flows consisted of foreign aid, commercial borrowing and deposits of non-resident Indians.[79]

Indian exports in 2005 India's exports were stagnant for the first 15 years after independence, due to the predominance of tea, jute and cotton manufactures, demand for which was generally inelastic. Imports in the same period consisted predominantly of machinery, equipment and raw materials, due to nascent industrialisation. Since liberalisation, the value of India's international trade has become more broad-based and has risen to Rs. 63,080,109 crores in 2003– 04 from Rs.1,250 crores in 1950–51.[citation needed] India's major trading partners are China, the US, the UAE, the UK, Japan and the EU.[80] The exports during August 2006 were $10.3 billion up by 41.14% and import were $13.87 billion with an increase of 32.16% over the previous year [8]. India is a founding-member of General Agreement on Tariffs and Trade (GATT) since 1947 and its successor, the World Trade Organization. While participating actively in its general council

meetings, India has been crucial in voicing the concerns of the developing world. For instance, India has continued its opposition to the inclusion of such matters as labour and environment issues and other non-tariff barriers into the WTO policies.[81]

Foreign direct investment in India As the third-largest economy in the world, India is undoubtedly one of the most preferred destinations for foreign direct investments (FDI); India has strength in information technology and other significant areas such as auto components, chemicals, apparels, pharmaceuticals and jewellery. India has always held promise for global investors, but its rigid FDI policies were a significant hindrance in this regard. However, as a result of a series of ambitious and 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. India has a large pool of skilled managerial and technical expertise. The size of the middle-class population at 300 million exceeds the population of both the US and the EU, and represents a powerful consumer market.[85] India's recently liberalised FDI policy (2005) allows up to a 100% FDI stake in ventures. 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. The upward moving growth curve of the real-estate sector owes some credit to a booming economy and liberalized FDI regime. In March 2005, the government amended the rules to allow 100 per cent FDI in the construction business.[86] This automatic route has been permitted in townships, housing, built-up infrastructure and construction development projects including housing, commercial premises, hotels, resorts, hospitals, educational institutions, recreational facilities, and city- and regional-level infrastructure