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Economy of India

Economy of India

Mumbai, Maharashtra is considered the trade and commerce capital of India[1][2]

Rank 10th (nominal) / 3rd (PPP)

Currency Indian rupee (INR) ( ) = 100 Paise

Fiscal year 1 April – 18 march

Tradeorganizations

WTO, SAFTA, BRIC, G-20 and others

Statistics

GDP $2.047 trillion (nominal: 10th; 2014)[3]

$7.277 trillion (PPP: 3rd; 2014)[3]

GDP growth 4.7% (2013)[4]

5.6% (2014 est.)[5]

GDP per capita $1,625 (nominal: 130th; 2014)[3]

$5,777(PPP: 127th; 2014)[3]

GDP by sector agriculture: 13.7%, industry: 21.5%, services: 64.8% (2013)[6][7]

Inflation (CPI) CPI: 5.5%, WPI: 1.7% (October 2014)[8]

Populationbelowpoverty line

29.5% (2012, Rangarajan panel)[9]

22% (2012, Reserve Bank of India),[10]

179.6 million people (2014, World Bank)[11]

Gini coefficient 33.9 (2012 est.)[12]

Labour force 487.3 million (2013 est.)[13]

Labour force byoccupation

agriculture: 49%, industry: 20%, services: 31% (2012 est.)

Unemployment 3% Urban, 2% Rural, 10.8 million Total(2013, NSSO method)[14]

Average grosssalary

$1.46 per hour ($3,036.8 yearly in 2010);[15]

GNI per capita: $1,570 yearly per person (2013);[16]

Average household income: $6,671 yearly (2011)[17]

Main industries agriculture, petroleum products,chemicals, pharmaceuticals, software,textiles, steel, transportation equipment, machinery, cement, mining,construction[18][19]

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Ease-of-doing-business rank

134th[20] (2014)

External

Exports $313.2 billion: merchandize exports,$150.9 billion: services exports,$464.2 billion: total (2013)[21]

Export goods software, petrochemicals, agricultureproducts, jewelry, engineeringgoods,[22] pharmaceuticals, textiles,chemicals, transportation parts, oresandother commodities[19]

Main exportpartners

European Union 16.8%(2012[21]) United States 12.8% United Arab Emirates 12.4% China 5.1% Singapore 4.7%

Imports $488.6 billion: merchandize imports,$128.1 billion: services imports,$616.7 billion: total (2012)[21]

Import goods crude oil, gold and precious stones, electronics, engineeringgoods,[22]chemicals, plastics, coal and ores, iron and steel, vegetableoil and other commodities[19]

Main importpartners

China 11.1% (2012[21]) European Union 11.1% United Arab Emirates 7.7% Saudi Arabia 6.7%

Switzerland 5.9%

FDI stock Inflows: $151.7 billion,Outflows: $54.6 billion (2009-2013)[23]

Public finances

Public debt 66.7% of GDP (2013.)[24]

Budget deficit 4.8% of GDP (2012–13)[25]

Revenues $181.3 billion billion (2013 est.)

Expenses $281.6 billion billion (2013 est.)

Economic aid $1.66 billion (2012)[26]

Credit rating BBB- (Domestic)BBB- (Foreign)BBB+ (T&C Assessment)Outlook: Stable(Standard & Poor's)[27]

Foreign reserves $313.68 billion (as of 17 October 2014)[28]

Main data source: CIA World Fact BookAll values, unless otherwise stated, are in US dollars.

The economy of India is thetenth-largest in the world bynominal GDP andthe third-largest by purchasing power parity (PPP).[29] The country is one ofthe G-20 major economies, a member of BRICSand a developing economy thatis among the top 20 global traders according to theWTO.[30] India was the 19th-

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largest merchandise and the 6th largest services exporter in the world in 2013; itimported a total of $616.7 billion worth of merchandise and services in 2013, asthe 12th-largest merchandise and 7th largest services importer.[31] India'seconomic growth slowed to 4.7% for the 2013–14 fiscal year, in contrast tohigher economic growth rates in 2000s.[32] IMF projects India's GDP to grow at5.6% over 2014-15.[5] Agriculture sector is the largest employer in India'seconomy but contributes a declining share of its GDP (13.7% in 2012-13).[6] Itsmanufacturing industry has held a constant share of its economic contribution,while the fastest-growing part of the economy has been its services sector -which includes construction, telecom, software and information technologies,infrastructure, tourism, education, health care, travel, trade, banking and othercomponents of its economy.[7]

The post independence-era Indian economy (from 1947 to 1991) was a mixedeconomywith an inward-looking, centrally planned, interventionist policiesandimport-substituting economic model that failed to take advantage of the post-warexpansion of trade and that nationalized many sectors of its economy.[33] India'sshare of global trade fell from 1.3% in 1953 to 0.5% in 1983.[34] This modelcontributed to widespread inefficiencies and corruption, and it was poorlyimplemented.[35]

After a fiscal crisis in 1991, India has increasingly adopted free-market principlesand liberalised its economy to international trade. These reforms were started byformer Finance minister Manmohan Singhunder the guidance of PrimeMinister P.V.Narasimha Rao. They eliminated much ofLicence Raj, a pre- andpost-British era mechanism of strict government controls on setting up newindustry. Following these economic reforms, and a strong focus on developingnational infrastructure such as the Golden Quadrilateral project by former PrimeMinister Atal Bihari Vajpayee, the country's economic growth progressed at arapid pace, with relatively large increases in per-capita incomes.[36] The southwestern state of Maharashtracontributes the highest towards India's GDP amongall states, while Bihar is among its poorest states in terms of GNI percapita. Mumbai is known as the trade and financial capital of India.[1][2][37]

Contents [hide]

1 Overview2 History

2.1 Pre-colonial period (up to 1773)2.2 Colonial period (1773–1947)

2.3 Pre-liberalisation period (1947–1991)2.4 Post-liberalisation period (since 1991)

3 Sectors3.1 Agriculture

3.2 Industry3.2.1 Petroleum products and chemicals

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3.2.2 Pharmaceuticals3.2.3 Engineering

3.2.4 Gems and jewelry3.2.5 Textile3.2.6 Mining

3.3 Services3.3.1 Energy and power

3.3.2 Infrastructure3.3.3 Retail3.3.4 Tourism

3.3.5 Banking and finance4 External trade and investment

4.1 Global trade relations4.2 Balance of payments

4.3 Foreign direct investment5 Currency6 Income and consumption7 Employment

8 Economic trends and issues8.1 Agriculture8.2 Corruption8.3 Education

8.4 Economic disparities9 Insurance10 Security Markets

11 See also12 Notes13 References14 Further reading

15 External links

Overview [edit]

The combination of protectionist, import-substitution, and Fabiansocialism, social democratic-inspired policies governed India for sometime afterthe end of British occupation. The economy was then characterised by extensiveregulation,protectionism, public ownership of large monopolies, pervasivecorruption and slow growth.[38][39] Since 1991, continuing economicliberalisation has moved the country towards a market-based economy.[38][39] By2008, India had established itself as one of the world's faster-growingeconomies. Growth significantly slowed to 6.8% in 2008–09, but subsequentlyrecovered to 7.4% in 2009–10, while the fiscal deficitrose from 5.9% to a high6.5% during the same period.[40] India's current account deficit surged to 4.1% ofGDP during Q2 FY11 against 3.2% the previous quarter. The unemployment rate

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The spice trade between India andEurope was the main catalyst fortheAge of Discovery.[43]

Atashgah is a temple builtby Indian traders before 1745.The temple is west of Caspian

for 2012–13, according to Government of India's Labour Bureau, was 4.7%nationwide, by UPS method;[13] and 3% by NSSO method.[14]India's consumerprice inflation has ranged between 8.9 to 12% over the 2009-2013 period.[41]

History [edit]

Main articles: Economic history of India and Timeline of the economy of India

Pre-colonial period (up to 1773) [edit]

The citizens of the Indus Valley civilisation, a permanent settlement thatflourished between 2800 BC and 1800 BC, practiced agriculture, domesticatedanimals, used uniform weights and measures, made tools and weapons, andtraded with other cities. Evidence of well-planned streets, a drainage systemand water supply reveals their knowledge of urban planning, which included theworld's first urban sanitationsystems and the existence of a form of municipalgovernment.[42]

Maritime trade was carried outextensively between SouthIndia and southeast and West Asia fromearly times until around the fourteenthcentury AD. Boththe Malabar andCoromandelCoasts were the sites of importanttrading centres from as early as the firstcentury BC, used for import and exportas well as transit points betweentheMediterranean region and southeastAsia.[44]Over time, traders organised themselves into associations whichreceived state patronage. Raychaudhuri and Habib claim this state patronage foroverseas trade came to an end by the thirteenth century AD, when it was largelytaken over by the local Parsi, Jewish and Muslim communities, initially on theMalabar and subsequently on the Coromandel coast.[45]

Other scholars suggest trading from India toWest Asia and Eastern Europe was activebetween 14th and 18th century.[46][47][48] Duringthis period, Indian traders had settledin Surakhani, a suburb of greaterBaku,Azerbaijan. These traders had built a Hindutemple, now preserved by the government ofAzerbaijan. French Jesuit Villotte, who lived inAzerbaijan in late 1600s, wrote this Indian templewas revered by Hindus;[49] the temple hasnumerous carvings in Sanskrit or Punjabi, dated

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Sea, between West Asia andEastern Europe. Theinscription shown is inSanskrit (above) and Persian.

Silver coin oftheMaurya Empire,3rd century BC.

Silver coin oftheGupta dynasty,5th century AD.

to be between 1500 and 1745 AD. The Atashgahtemple built by the Baku-resident traders fromIndia suggests commerce was active andprosperous for Indians by the 17thcentury.[50][51][52][53]

Further north, the Saurashtra and Bengal coasts played an important role inmaritime trade, and the Gangetic plains and the Indus valley housed severalcentres of river-borne commerce. Most overland trade was carried out viathe Khyber Pass connecting the Punjab region with Afghanistan and onward tothe Middle East and Central Asia.[54] Although many kingdoms and rulers issuedcoins, barter was prevalent. Villages paid a portion of their agricultural produceas revenue to the rulers, while their craftsmen received a part of the crops atharvest time for their services.[55]

Sean Harkin estimates China andIndia may have accounted for 60 to70 percent of world GDP in the 17thcentury.[56]

Assessment of India's pre-colonialeconomy is mostly qualitative, owingto the lack of quantitative information.The Mughal economy functioned on an elaborate system of coined currency,land revenue and trade. Gold, silver and copper coins were issued by theroyal mints which functioned on the basis of free coinage.[57] The political stabilityand uniform revenue policy resulting from a centralised administration under theMughals, coupled with a well-developed internal trade network, ensured thatIndia, before the arrival of the British, was to a large extent economically unified,despite having a traditional agrarian economy characterised by a predominanceof subsistence agriculture dependent on primitive technology.[58] After the declineof the Mughals, western, central and parts of south and north India wereintegrated and administered by the Maratha Empire. After the loss at the ThirdBattle of Panipat, the Maratha Empire disintegrated into several confederatestates, and the resulting political instability and armed conflict severely affectedeconomic life in several parts of the country, although this was compensated forto some extent by localised prosperity in the new provincial kingdoms.[59] By theend of the eighteenth century, the British East India Companyentered the Indianpolitical theatre and established its dominance over other European powers. Thismarked a determinative shift in India's trade, and a less powerful impact on therest of the economy.[60]

Colonial period (1773–1947) [edit]

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An aerial view of Calcutta Port takenin 1945. Calcutta, which was theeconomic hub of British India, sawincreased industrial activity duringWorld War II.

There is no doubt that our grievances against the British Empire hada sound basis. As the painstaking statistical work of the Cambridgehistorian Angus Maddison has shown, India's share of world incomecollapsed from 22.6% in 1700, almost equal to Europe's share of23.3% at that time, to as low as 3.8% in 1952. Indeed, at thebeginning of the 20th century, "the brightest jewel in the BritishCrown" was the poorest country in the world in terms of per capitaincome.

— Manmohan Singh[61]

Company rule in India brought a major change in the taxation and agriculturalpolicies, which tended to promote commercialisation of agriculture with a focuson trade, resulting in decreased production of food crops, mass impoverishmentand destitution of farmers, and in the short term, led to numerousfamines.[62] The economic policies of the British Raj caused a severe decline inthe handicrafts andhandloom sectors, due to reduced demand and dippingemployment.[63] After the removal of international restrictions by the Charter of1813, Indian trade expanded substantially and over the long term showed anupward trend.[64] The result was a significant transfer of capital from India toEngland, which, due to the colonial policies of the British, led to a massive drainof revenue rather than any systematic effort at modernisation of the domesticeconomy.[65]

India's colonisation by the British created an institutional environment that, onpaper, guaranteed property rights among the colonisers, encouraged free trade,and created a single currency with fixed exchange rates, standardised weightsand measures and capital markets. It also established a system of railways andtelegraphs, a civil service that aimed to be free from political interference, acommon-law and an adversarial legal system.[68] This coincided with majorchanges in the world economy – industrialisation, and significant growth in

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Estimated per capita GDP of India and UnitedKingdom from 1700 to 1950, inflation adjusted to1990 US$.[66] Other estimates[67] suggest asimilar stagnation in India's per capita GDP andincome during the colonial era.

production and trade. However,at the end of colonial rule, Indiainherited an economy that wasone of the poorest in thedeveloping world,[69] withindustrial development stalled,agriculture unable to feed arapidly growing population, alargely illiterate and unskilledlabour force, and extremelyinadequate infrastructure.[70]

The 1872 census revealed that91.3% of the population of theregion constituting present-day

India resided in villages,[71] and urbanisation generally remained sluggish untilthe 1920s, due to the lack of industrialisation and absence of adequatetransportation. Subsequently, the policy of discriminating protection (wherecertain important industries were given financial protection by the state), coupledwith the Second World War, saw the development and dispersal of industries,encouraging rural-urban migration, and in particular the large port citiesof Bombay, Calcutta andMadras grew rapidly. Despite this, only one-sixth ofIndia's population lived in cities by 1951.[72]

The impact of British occupation on India's economy is a controversial topic.Leaders of the Indian independence movement and economic historians haveblamed colonial occupation for the dismal state of India's economy in itsaftermath and argued that financial strength required for industrial developmentin Europe was derived from the wealth taken from colonies in Asia and Africa. Atthe same time, right-wing historians have countered that India's low economicperformance was due to various sectors being in a state of growth and declinedue to changes brought in by colonialism and a world that was moving towardsindustrialisation and economic integration.[73]

Pre-liberalisation period (1947–1991) [edit]

Indian economic policy after independence was influenced by the colonialexperience, which was seen by Indian leaders as exploitative, and by thoseleaders' exposure to British social democracy as well as the planned economy ofthe Soviet Union.[70] Domestic policy tended towards protectionism, with a strongemphasis onimport substitution industrialisation, economic interventionism, alarge government run public sector, business regulation, and centralplanning,[74] while trade and foreign investment policies were relativelyliberal.[75] Five-Year Plans of Indiaresembled central planning in the SovietUnion. Steel, mining, machine tools, telecommunications, insurance, and power

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plants, among other industries, were effectively nationalised in the mid-1950s.[76]

Jawaharlal Nehru, the first prime minister of India,along with the statistician Prasanta ChandraMahalanobis, formulated and oversaw economicpolicy during the initial years of the country'sindependence. They expected favourableoutcomes from their strategy, involving the rapiddevelopment of heavy industry by both publicand private sectors, and based on direct and

indirect state intervention, rather than the more extreme Soviet-style centralcommand system.[78][79] The policy of concentrating simultaneously on capital-and technology-intensive heavy industry and subsidising manual, low-skill cottage industries was criticised by economist Milton Friedman, who thoughtit would waste capital and labour, and retard the development of smallmanufacturers.[80] The rate of growth of the Indian economy in the first threedecades after independence was derisively referred to as the Hindu rate ofgrowth by economists, because of the unfavourable comparison with growthrates in other Asian countries.[81][82]

Since 1965, the use of high-yielding varieties ofseeds, increased fertilisers andimproved irrigationfacilities collectively contributedto the Green Revolution in India, which improvedthe condition of agriculture by increasing cropproductivity, improving crop patterns andstrengthening forward and backward linkagesbetween agriculture and industry.[83] However, ithas also been criticised as an unsustainableeffort, resulting in the growth of capitalisticfarming, ignoring institutional reforms andwidening income disparities.[84]

Subsequently the Emergency and GaribiHataoconcept under which income tax levels atone point rose to a maximum of 97.5%, a recordin the world for non-communist economies,started diluting the earlier efforts.

Post-liberalisation period (since 1991) [edit]

Main articles: Economic liberalisation in India andEconomic development inIndia

In the late 1970s, the government led by Morarji Desai eased restrictions oncapacity expansion forincumbent companies, removed price controls, reducedcorporate taxes and promoted the creation of small scale industries in large

“ Never talk tome about profit,Jeh, it is a dirtyword. ”

—Nehru, India's Fabian Socialisminspired first prime minister to

industrialist J.R.D. Tata, when Tatasuggested state-owned companies

should be profitable, [77]

“ (In the currentIndianregulatorysystem, ) Icannot decidehow much toborrow, whatshares to issue,at what price,what wagesand bonus topay, and whatdividend togive. I evenneed thegovernment'spermission forthe salary I payto a seniorexecutive. ”—J. R. D. Tata in 1969, [77]

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GDP of India has risen rapidly since 1991.

numbers. However, thesubsequent governmentpolicy of Fabiansocialism hampered thebenefits of the economy,leading to high fiscal deficitsand a worsening currentaccount. The collapse of theSoviet Union, which wasIndia's major trading partner,and the Gulf War, whichcaused a spike in oil prices, resulted in a major balance-of-payments crisis forIndia, which found itself facing the prospect of defaulting on its loans.[85] Indiaasked for a $1.8 billion bailout loan from the International Monetary Fund (IMF),which in return demanded de-regulation.[86]

In response, Prime Minister Narasimha Rao, along with his financeministerManmohan Singh, initiated the economic liberalisation of 1991. Thereforms did away with the Licence Raj, reduced tariffs and interest rates andended many public monopolies, allowing automatic approval of foreign directinvestment in many sectors.[87] Since then, the overall thrust of liberalisation hasremained the same, although no government has tried to take on powerfullobbies such as trade unions and farmers, on contentious issues such asreforming labour laws and reducingagricultural subsidies.[88] By the turn of the21st century, India had progressed towards a free-market economy, with asubstantial reduction in state control of the economy and increased financialliberalisation.[89] This has been accompanied by increases in life expectancy,literacy rates and food security, although urban residents have benefited morethan agricultural residents.[90]

While the credit rating of India was hit by its nuclear weapons tests in 1998, it hassince been raised to investment level in 2003 by S&P and Moody's.[91] Indiaenjoyed high growth rates for a period from 2003 to 2007 with growth averaging9% during this period.[92] Growth then moderated due to the global financial crisisstarting in 2008. In 2003, Goldman Sachs predicted that India's GDP in currentprices would overtake France and Italy by 2020, Germany, UK and Russia by2025 and Japan by 2035, making it the third largest economy of the world,behind the US and China. India is often seen by most economists as a risingeconomic superpower and is believed to play a major role in the global economyin the 21st century.[93][94]

Starting in 2012, India entered a period of more anaemic growth, with growthslowing down to 4.4%.[95] Other economic problems also became apparent: aplungingIndian rupee, a persistent high current account deficit and slow industrialgrowth. Hit by the U.S. Federal Reserve's decision to taper quantitative easing,

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Percent labor employment in India by its economicsectors (2010).[97]

The GDP contribution of various sectors of Indianeconomy have evolved between 1951 to 2013, as itseconomy has diversified and developed.

foreign investors had been rapidly pulling out money from India though this hasnow reversed with the Stock market at near all time high and the current accountdeficit narrowing substantially.

India is ranked at 134 out of 189, overall, in World Bank's 2013 ease of doingbusiness index. However, this score masks the underlying data: in terms ofstarting a business, dealing with bureaucratic permits and enforcing contracts, itis ranked among the 10 worst in the world; while in terms of protecting investors,general operations and other measures, India ranks very favorably among 189countries.[96]

Sectors [edit]

Historically, India hasclassified and tracked itseconomy and GDP as threesectors - agriculture,industry and services.Agriculture includes crops,horticulture, milk and animalhusbandry, aquaculture,fishing, sericulture,aviculture, forestry andrelated activities. Industryincludes variousmanufacturing sub-sectors.India's definition of servicessector includes itsconstruction, retail, software,IT, communications,hospitality, infrastructureoperations, education,health care, banking andinsurance, and many othereconomic activities.[98][99]

Agriculture [edit]

Main articles: Agriculturein India, Forestry in India,Animal husbandry in India,Fishing inIndia and Natural resources in India

India ranks second worldwide in farm output. Agriculture and allied sectors likeforestry, logging and fishing accounted for 17% of the GDP and employed 51%of the total workforce in 2012. As Indian economy has diversified and grown,agriculture's contribution to GDP has steadily declined from 1951 to 2011, yet it

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is still the largest employment source and a significant piece of the overall socio-economic development of India.[100] Crop yield per unit area of all crops havegrown since 1950, due to the special emphasis placed on agriculture in the five-year plans and steady improvements in irrigation, technology, application ofmodern agricultural practices and provision of agricultural credit and subsidiessince the Green Revolution in India. However, international comparisons revealthe average yield in India is generally 30% to 50% of the highest average yield inthe world.[101] Indian states Uttar Pradesh, Punjab, Haryana, Madhya Pradesh,Andhra Pradesh, Bihar, West Bengal, Gujarat and Maharashtra are keyagricultural contributing states of India.

India receives an average annual rainfall of 1,208 millimetres (47.6 in) and a totalannual precipitation of 4000 billion cubic metres, with the total utilisable waterresources, including surface and groundwater, amounting to 1123 billion cubicmetres.[102] 546,820 square kilometres (211,130 sq mi) of the land area, orabout 39% of the total cultivated area, is irrigated.[103] India's inland waterresources including rivers, canals, ponds and lakes and marine resourcescomprising the east and west coasts of the Indian ocean and other gulfs andbays provide employment to nearly six million people in the fisheries sector. In2008, India had the world's third largest fishing industry.[104]

India is the largest producer in the world of milk, jute and pulses, and also hasthe world's second largest cattle population with 175 million animals in2008.[105] It is the second largest producer of rice, wheat, sugarcane, cottonand groundnuts, as well as the second largest fruit and vegetable producer,accounting for 10.9% and 8.6% of the world fruit and vegetable productionrespectively.[105] India is also the second largest producer and the largestconsumer of silk in the world, producing 77,000 tons in 2005.[106]

India exports several agriculture products, such as Basmati rice, wheat, cereals,spices, fresh fruits, dry fruits, buffalo beef meat, cotton, tea, coffee and othercash crops particularly to the Middle East, Southeast and East Asian countries. Itearns about 10 percent of its export earnings from this trade.[19]

Industry [edit]

Industry accounts for 26% of GDP and employs 22% of the totalworkforce.[107]According to the World Bank, India's industrial manufacturing GDPoutput in 2012 was 10th largest in the world on current US dollar basis ($239.5billion),[108] and 9th largest on inflation adjusted constant 2005 US dollar basis($197.1 billion).[109] The Indian industrial sector underwent significant changes asa result of the economic liberalisation in India economic reforms of 1991, whichremoved import restrictions, brought in foreign competition, led to theprivatisation of certain government owned public sector industries, liberalisedthe FDI regime, improved infrastructure and led to an expansion in theproduction of fast moving consumer goods.[110] Post-liberalisation, the Indian

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private sector was faced with increasing domestic as well as foreign competition,including the threat of cheaper Chinese imports. It has since handled the changeby squeezing costs, revamping management, and relying on cheap labour andnew technology. However, this has also reduced employment generation evenby smaller manufacturers who earlier relied on relatively labour-intensiveprocesses.[111]

Petroleum products and chemicals [edit]

Petroleum products and chemicals are a major contributor to India's industrialGDP, and together they contribute over 34% of its export earnings. India hostsmany oil refinery and petrochemical operations, including the world's largestrefinery complex in Jamnagar that processes 1.24 million barrels of crude perday.[112] By volume, Indian chemical industry was the third largest producer inAsia, and it alone contributed 5% of its GDP. India is one of the top 5 worldproducers of agrochemicals, polymers and plastics, dyes and various organicand inorganic chemicals.[113] Despite being a large producer and exporter ofchemicals, India is a net importer of chemicals given its domestic demand forproducts.[114]

Pharmaceuticals [edit]

The Indian pharmaceutical industry has grown in recent years to become amajor manufacturer of health care products to the world. India produced about 8per cent of global pharmaceutical supply in 2011 by value, that included over60,000 generic brands of medicines sold around the world.[115] It is one of thefastest-growing sub-sectors of its industry and significant contributor of India'sexport earnings. The state of Gujarat has become a hub for the manufacture andexport of pharmaceuticals and APIs.[116] The industry is expected to double fromits 2012 levels to US$55 billion by 2020, according to a McKinsey report.[117]

Engineering [edit]

Engineering industry of India is the largest sub-sector of its industry GDP and isone of three largest foreign exchange earning sectors for the country.[118] Itincludes transport equipment, machine tools, capital goods, transformers,switchgears, furnaces, cast and forged simple to precision parts for turbines,automobiles and railways. The industry employs about four million workers. Onvalue added basis, India's engineering industry sector exported $67 billion worthof engineering goods in 2013-14 fiscal year, as well served part of the domesticdemand for engineering goods.[119]

The engineering industry of India includes its growing car, motorcycle andscooters industry, as well as productivity machinery such as tractors. Indiamanufactured and assembled about 18 million passenger and utility vehicles in2011, of which 2.3 million were exported.[120] India is the world's largest producerof and the largest market for tractors, accounting for 29% of world's tractor

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Gems and jewelry industry is anancient and continuing major sub-sectors of Indian economy. Manyfamous stones such as the Koh-i-noorand Hope Diamond (above), nowat the Smithsonian, came fromIndia.[122][123]

production in 2013.[120][121]India is the 12th largest producer and 7th largestconsumer of machine tools in the world.[120]

Gems and jewelry [edit]

India is one of the world's largestdiamonds and gem polishing and jewelrymanufacturing center; it is also one of thetwo largest consumers ofgold.[124][125] After crude oil andpetroleum products, the export andimport of gold, precious metals, preciousstones, gems and jewelry accounts forthe largest portion of India's global trade.The industry contributes about 7% ofIndia's GDP, employs millions, and is amajor source of its foreign exchangeearnings.[126] The gems and jewelleryindustry, in 2013, created 251000 crore (US$41 billion) in

economic output on value added basis. It is growing sector of Indian economy,and A.T. Kearneyprojects it to grow to 500000 crore (US$81 billion) by2018.[127]

The gems and jewelry industry has been an ancient art and continuouseconomic activity in India, traced over several thousand years.[128] Till 18thcentury, India was the world's only known major reliable source of diamondmining and its processing.[124] Now, South Africa and Australia are the majorsources of diamonds and precious metals, but along with Antwerp, New York,and Ramat Gan, Indian cities such as Surat and Mumbai are the hubs of world'sjewelry polishing, cutting, precision finishing, supply and trade. Unlike othercenters, the gems and jewelry economic activity in India is primarily artisansdriven, is manual, the sector is highly fragmented, and 96% of the industry isserved by family owned operations.

Indian gem and jewelry economy's particular strength is in precision cutting,polishing and processing small diamonds (below one carat).[124] Yet, India is alsoa hub for processing of larger diamonds, pearls and other precious stones.About 11 out of 12 diamonds set in any jewellery in the world are cut andpolished in India.[129]It is also a major hub of gold and other precious metal-based precision jewelry industry. Its domestic demand for gold and jewelryproducts is another driver of India's GDP.[127]

Textile [edit]

Textile industry contributes about 4 per cent to the country’s GDP, 14 per cent of

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the industrial production, and 17 per cent to export earnings.[130] India's textileindustry has transformed from a declining sector to a rapidly developing one inrecent years. After freeing the industry in 2004–2005 from a number oflimitations, primarily financial, the government gave a green light to massiveinvestment inflows – both domestic and foreign. During the period from 2004 to2008, total investment into textile sector increased by 27 billiondollars. Ludhiana produces 90% of woollens in India and is known as theManchester of India. Tirupur has gained universal recognition as the leadingsource of hosiery, knitted garments, casual wear and sportswear. Expandingtextile centers such as Ichalkaranji enjoy one of the highest per capita incomes inthe country.[131] India's cotton farms, fiber and textile industry providesemployment to 45 million people in India,[130] including some child labour(1%).The sector is estimated to employ around 400,000 children under the age of18.[132]

Mining [edit]

Main article: Mining in India

India's mining industry was the 4th largest producer of minerals in the world byvolume, and 8th largest producer by value in 2009.[133] In 2013, it mined andprocessed 89 minerals, of which 4 were fuel, 3 were atomic energy minerals, and80 non-fuel.[134] The government owned public sector accounted for 68% ofmineral produced by volume, in 2011-12.[135]

Nearly 50% of India's mining industry, by output value, is concentrated in eightstates - Odisha, Rajasthan, Chhattisgarh, AndhraPradesh, Telangana, Jharkhand, Madhya Pradesh and Karnataka. Another 25%of the output by value comes from its offshore oil and gas resources.[135] Indiaoperated about 3,000 mines in 2010, half of which were coal, limestone and ironore.[136] On output value basis, India's was one of five largest producers of mica,chromite, coal, lignite, iron ore, bauxite, barites, zinc, manganese; while beingone of the 10 largest global producers of many other minerals.[133][135] India wasfourth largest producer of steel in the world in 2013,[137]and seventh largestproducer of aluminum.[138]

India's mineral resources are vast.[139] However, its mining industry has declined- contributing 2.3% of its GDP in 2010 compared to 3% in 2000, and employed2.9 million people - a decreasing percentage of its total labor. India is a netimporter of many minerals including coal. India's mining sector decline isbecause of complex permit, regulatory and administrative procedures that take 6to 20 fold more time than other mining countries such as Australia and SouthAfrica, inadequate infrastructure, shortage of capital resources, and slowadoption of ecologically and environmentally sustainable technologies.[135][140]

Services [edit]

Further information: Information technology in India and Business process

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As of 2010, India imported about70% of its crude oilrequirements.[144]Shown here isan ONGC platform atMumbai High inthe Arabian Sea, one of the sites ofdomestic production.

outsourcing in India

India's services sector has the largest share in the GDP, accounting for 57% in2012, up from 15% in 1950.[107] It is the 12th largest in the world by nominalGDP, andfourth largest when purchasing power is taken into account. Theservices sector provides employment to 27% of the work force. Informationtechnology and business process outsourcing are among the fastest-growingsectors, having a cumulative growth rate of revenue 33.6% between 1997 and1998 and 2002–03 and contributing to 25% of the country's total exports in2007–08.[141] The growth in the IT sector is attributed to increased specialisation,and an availability of a large pool of low cost, highly skilled, educated and fluentEnglish-speaking workers, on the supply side, matched on the demand side byincreased demand from foreign consumers interested in India's service exports,or those looking to outsource their operations. The share of the Indian ITindustry in the country's GDP increased from 4.8% in 2005–06 to 7% in2008.[142] In 2009, seven Indian firms were listed among the top 15 technologyoutsourcing companies in the world.[143]

Energy and power [edit]

Main article: Electricity sector in India

As of 2009, India is the fourth largestproducer of electricity and oil productsand the fourth largest importer of coaland crude-oil in the world.[145] Coal andoil together account for 66% of theenergy consumption of India.[146]

India's oil reserves meet 25% of thecountry's domestic oildemand.[147][148] As of 2012, India's totalproven oil reserves of 5.5 million barrels(870 million litres), while gas reservesstood at 43,800 million cubic feet(1,240 million cubic metres).[149] Oil andnatural gas fields are located offshore at Mumbai High, Krishna GodavariBasin and the Cauvery Delta, and onshore mainly in the states of Assam, GujaratandRajasthan.[150] India is the fourth largest consumer of oil in the world andimported 726386 crore (US$120 billion) worth of oil in 2011-12,[151] which hadan adverse effect on its current account deficit. The petroleum industry in Indiamostly consists of public sector companies such as Oil and Natural GasCorporation (ONGC),Hindustan Petroleum Corporation Limited (HPCL), BharatPetroleum Corporation Limited (BPCL) and Indian Oil Corporation Limited(IOCL). There are some major private Indian companies in the oil sector suchas Reliance Industries Limited (RIL) which operates the world's largest oil

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refining complex.[152]

As of December 2011, India had an installed power generation capacity of233.929GW as of December 2013, of which thermal power contributed68.31%,hydroelectricity 17.05%, other sources of renewable energy 12.59%,and nuclear power 2.04%.[153][154] India meets most of its domestic energydemand through its 106 billion tonnes of coal reserves.[155] India is also rich incertain alternative sources of energy with significant future potential suchas solar, wind and biofuels (jatropha, sugarcane). India's dwindling uraniumreserves stagnated the growth of nuclear energy in the country for manyyears.[156] Recent discoveries of natural uranium inTummalapalle belt, whichpromises to be one of the top 20 of the world's reserves,[157][158][159] and anestimated reserve of 846,477 metric tons (933,081 short tons) of thorium[160] –about 25% of world's reserves – are expected to fuel the country'sambitious nuclear energy program in the long-run. The Indo-US nuclear deal hasalso paved the way for India to import uranium from other countries.[161]

Infrastructure [edit]

Main articles: Indian road network, Indian Railways, Ports inIndia and Transport in India

India's infrastructure and transport sector contributes about 5% of its GDP. Indiahas the world's second largest road network in quantitative terms,[162] coveringmore than 4.3 million kilometers. Qualitatively, India's roads are a mix of modernhighways and narrow, unpaved roads. India also has the lowest kilometer laneroad density per 100,000 people among G-27 countries - leading to trafficcongestion. It is upgrading its infrastructure. As of May 2014, India hadcompleted and placed in use over 22,600 kilometres of recently built 4 or 6-lanehighways connecting most of its major manufacturing, commercial and culturalcenters.[163] India's road infrastructure carries 60% of freight and 87% ofpassenger traffic.[164]

Indian Railways is the fourth largest rail network in the world, with a track lengthof 114,500 kilometers and 7,172 stations. This government owned and operatedrailway network carried an average of 23 million passengers a day, and over abillion tonnes of freight a year.[165] India has a coastline of 7,500 kilometers with13 major ports and 60 operational non-major ports, which together handle 95%of the country’s external trade by volume and 70% by value (rest handled byair).[166]Nhava Sheva, Mumbai is the largest public port, while Mundra is thelargest private sea port.[167] The airport infrastructure of India includes 125airports,[168] of which 66 airports are licensed to handle both passengers andlogistics.[169]

About 74 people out of 100 have land or wireless telephones in India, or about927 million telephone subscribers, two-thirds of them in urban areas.[170] Internetuse has been growing rapidly in India, with an estimated 243 million users in

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June 2014.[171] This is projected to grow to 330–370 million users by 2016.[172]

Retail [edit]

Main article: Retailing in India

Retail industry contributes between 14–15%[173][174] to 20% of India'sGDP.[175] The Indian retail market is estimated to be US$450 billion and one ofthe top five retail markets in the world by economic value. India is one of thefastest-growing retail market in the world,[176][177] and is projected to reach $1.3trillion by 2020.[175][178]

India's retailing industry mostly consists of the local mom and pop store, ownermanned shops and street vendors. Organised retail supermarkets are growingbut small, with a market share of 4% as of 2008.[179] In 2012 governmentpermitted 51% FDI in multi brand retail and 100% FDI in single brand retail.However, a lack of back end warehouse retail infrastructure, as well as statelevel permits and red tape continues to limit organized retail's growth in Indianeconomy.[180] Over thirty regulations such as "signboard licences" and "anti-hoarding measures" have to be complied before a store can open doors. Thereare taxes for moving goods from state to state, and even within states.[179] Thelack of infrastructure and efficient retail network, according to The Wall StreetJournal, causes a third of India's agriculture produce to be lost from spoilage.[181]

Tourism [edit]

Main articles: Tourism in India and Medical tourism in India

International and domestic tourism industry contributes more to India's GDP thanits textile sector. India attracted 6.85 million international tourist arrivals and$18.4 billion in foreign exchange earnings from tourism receipts in2013.[182] Tourism to India has seen a steady growth, year on year, from 4.45million arrivals in 2006 to nearly 7 million arrivals in 2013. The United States isthe largest source of international tourists to India, while European Union nationsand Japan are other major sources of international tourists.[183][184] Less than10% of international tourists visit the Taj Mahal, with majority visiting othercultural, thematic and holiday circuits.[185] Over 12 million Indian citizens takeinternational trips each year for tourism, while domestic tourism within India addsabout 740 million Indian travelers.[183] The combined international and domestictourism contributed 5.92% of India's GDP, and 9.3% to its employment in2011.[183][186] India has a fast-growingmedical tourism sector of its health careeconomy offering low cost health and long term care.[187][188]

Banking and finance [edit]

Main article: Finance in India

See also: Banking in India and Insurance in India

The Indian money market is classified into the organised sector, comprising

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A map showing the global distribution of Indian exports in

private, public and foreign owned commercial banks and cooperative banks,together known as scheduled banks, and the unorganised sector, which includesindividual or family owned indigenous bankers or money lenders and non-banking financial companies.[189] The unorganised sector and microcredit are stillpreferred over traditional banks in rural and sub-urban areas, especially for non-productive purposes, like ceremonies and short duration loans.[190]

Prime Minister Indira Gandhi nationalised 14 banks in 1969, followed by sixothers in 1980, and made it mandatory for banks to provide 40% of their netcredit to priority sectors like agriculture, small-scale industry, retail trade, smallbusinesses, etc. to ensure that the banks fulfill their social and developmentalgoals. Since then, the number of bank branches has increased from 8,260 in1969 to 72,170 in 2007 and the population covered by a branch decreased from63,800 to 15,000 during the same period. The total bank deposits increasedfrom 59.1 billion (US$960 million) in 1970–71 to 38309.22 billion (US$620 billion) in 2008–09. Despite an increase of rural

branches, from 1,860 or 22% of the total number of branches in 1969 to 30,590or 42% in 2007, only 32,270 out of 500,000 villages are covered by a scheduledbank.[191][192]

India's gross domestic saving in 2006–07 as a percentage of GDP stood at ahigh 32.8%.[193] More than half of personal savings are invested in physicalassets such as land, houses, cattle, and gold.[194] The government owned publicsector banks hold over 75% of total assets of the banking industry, with theprivate and foreign banks holding 18.2% and 6.5% respectively.[195] Sinceliberalisation, the government has approved significant banking reforms. Whilesome of these relate to nationalised banks, like encouraging mergers, reducinggovernment interference and increasing profitability and competitiveness, otherreforms have opened up the banking and insurance sectors to private andforeign players.[147][196]

External trade and investment [edit]

Further information: Globalisation in India and List of the largest tradingpartners of India

Global trade relations [edit]

Until theliberalisation of1991, India waslargely andintentionally isolatedfrom the worldmarkets, to protectits economy and to

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2006 as a percentage of the top market (USA – $20.9 billion).

India's exports (top) and imports, by value, in 2013-2014.

achieve self-reliance. Foreigntrade was subject to import tariffs, export taxes and quantitative restrictions,while foreign direct investment (FDI) was restricted by upper-limit equityparticipation, restrictions on technology transfer, export obligations andgovernment approvals; these approvals were needed for nearly 60% of new FDIin the industrial sector. The restrictions ensured that FDI averaged only around$200 million annually between 1985 and 1991; a large percentage of the capitalflows consisted of foreign aid, commercial borrowing and deposits of non-resident Indians.[197] India's exports were stagnant for the first 15 years afterindependence, due to general neglect of trade policy by the government of thatperiod. Imports in the same period, due to industrialisation being nascent,consisted predominantly of machinery, raw materials and consumer goods.[198]

Since liberalisation, the value ofIndia's international trade hasincreased sharply,[199] with thecontribution of total trade ingoods and services to the GDPrising from 16% in 1990–91 to47% in 2008–10.[200][201] Indiaaccounts for 1.44% of exportsand 2.12% of imports formerchandise trade and 3.34%of exports and 3.31% ofimports for commercial servicestrade worldwide.[201] India'smajor trading partners are theEuropean Union, China, theUnited States of America andthe United ArabEmirates.[202] In 2006–07,major export commoditiesincluded engineering goods,petroleum products, chemicals

and pharmaceuticals, gems and jewellery, textiles and garments, agriculturalproducts, iron ore and other minerals. Major import commodities included crudeoil and related products, machinery, electronic goods, gold and silver.[203] InNovember 2010, exports increased 22.3% year-on-year to 850.63 billion (US$14 billion), while imports were up 7.5% at 1251.33 billion(US$20 billion). Trade deficit for the same month dropped from 468.65 billion(US$7.6 billion) in 2009 to 400.7 billion (US$6.5 billion) in

2010.[204]

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Cumulative Current AccountBalance 1980–2008 based on IMF data

Share of top five investing countries inFDI inflows. (2000–2010)[216]

Rank Country Inflows Inflows (%)

India is a founding-member of General Agreement on Tariffs and Trade (GATT)since 1947 and its successor, the WTO. While participating actively in its generalcouncil meetings, India has been crucial in voicing the concerns ofthe developing world. For instance, India has continued its opposition to theinclusion of such matters as labour and environment issues and other non-tariffbarriers to trade into the WTO policies.[205]

Balance of payments [edit]

Since independence, India's balance ofpayments on its current account hasbeen negative. Since economicliberalisation in the 1990s, precipitated bya balance of payment crisis, India'sexports rose consistently, covering 80.3%of its imports in 2002–03, up from 66.2%in 1990–91.[206] However, the globaleconomic slump followed by a general deceleration in world trade saw theexports as a percentage of imports drop to 61.4% in 2008–09.[207] India'sgrowing oil import bill is seen as the main driver behind the large current accountdeficit,[144] which rose to $118.7 billion, or 11.11% of GDP, in 2008–09.[208] Between January and October 2010, India imported $82.1 billion worth ofcrude oil.[144]

Indian economy has run a trade deficit every year over 2002-2012 period, with amerchandise trade deficit of US$189 billion in 2011-12.[209] Its trade with Chinahas the largest deficit, about $31 billion in 2013.[210]

India's reliance on external assistance and concessional debt has decreasedsince liberalisation of the economy, and the debt service ratio decreased from35.3% in 1990–91 to 4.4% in 2008–09.[211] In India, External CommercialBorrowings (ECBs), or commercial loans from non-resident lenders, are beingpermitted by the Government for providing an additional source of funds toIndian corporates. TheMinistry of Finance monitors and regulates them throughECB policy guidelines issued by the Reserve Bank of India under the ForeignExchange Management Actof 1999.[212] India's foreign exchange reserves havesteadily risen from $5.8 billion in March 1991 to $318.6 billion in December2009. [213] In 2012, the United Kingdom announced an end to all financial aid toIndia, citing the growth and robustness of Indian economy.[214][215]

Foreign direct investment [edit]

See also Foreign direct investment, India section.

Into India

As the third-largest economy in the

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(million USD)1 Mauritius 50,164 42.002 Singapore 11,275 9.003 USA 8,914 7.004 UK 6,158 5.005 Netherlands 4,968 4.00

world in PPP terms, India hasattractedforeign directinvestment;[217] During the year2011, FDI inflow into India stood at$36.5 billion, 51.1% higher than2010 figure of $24.15 billion. Indiahas strengths in telecommunication, information technology and other significantareas such as auto components, chemicals, apparels, pharmaceuticals, andjewellery. Despite a surge in foreign investments, rigid FDI [218] policies were asignificant hindrance. Over time, India has adopted a number of FDIreforms.[217] India has a large pool of skilled managerial and technical expertise.The size of the middle-class population stands at 300 million and represents agrowing consumer market.[219]

India's liberalised its FDI policy in 2005, allowing up to a 100% FDI stake inventures. Industrial policy reforms have substantially reduced industrial licensingrequirements, removed restrictions on expansion and facilitated easy access toforeign technology and foreign direct investment FDI. The upward moving growthcurve of the real-estate sector owes some credit to a booming economy andliberalised FDI regime. In March 2005, the government amended the rules toallow 100% FDI in the construction sector, including built-up infrastructure andconstruction development projects comprising housing, commercial premises,hospitals, educational institutions, recreational facilities, and city- and regional-level infrastructure.[220] Over 2012-14, India extended these reforms to defense,telecom, oil, retail, aviation and a number of other sectors.[221][222]

During 2000–10, the country attracted $178 billion as FDI.[223] The inordinatelyhigh investment from Mauritius is due to routing of international funds throughthe country given significant tax advantages; double taxation is avoided due toa tax treatybetween India and Mauritius, and Mauritius is a capital gains taxhaven, effectively creating a zero-taxation FDI channel.[224]

From India

Since 2000, Indian companies have expanded overseas, investing FDI andcreating jobs outside India. Over the 2006-2010 period, FDI by Indian companiesoutside India amounted to 1.34 per cent of its GDP.[225] Indian companies havedeployed FDI and started operations in the United States,[226] while others haveexpanded in Europe and Africa.[227] The Indian company Tata is UnitedKingdom's largest manufacturer and private sector employer.[228][229]

Currency [edit]

Main articles: Indian rupee and Reserve Bank of India

The Indian rupee ( ) is the only legal tender in India, and is also accepted aslegal tender in the neighbouring Nepal and Bhutan, both of which peg their

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The RBI's newheadquarters in Mumbai

currency to that of theIndian rupee. The rupeeis divided into 100 paise.The highest-denominationbanknote is the 1,000note; the lowest-denomination coin incirculation is the 50 paisecoin;[230]with effect from30 June 2011 alldenominations below 50

paise have ceased to be legalcurrency.[231][232] India's monetary system ismanaged by the Reserve Bank of India (RBI), the country'scentralbank.[233] Established on 1 April 1935 and nationalised in 1949, the RBI servesas the nation's monetary authority, regulator and supervisor of the monetarysystem, banker to the government, custodian of foreign exchange reserves, andas an issuer of currency. It is governed by a central board of directors, headedby a governor who is appointed by the Government of India.[234]

The rupee was linked to the British pound from 1927 to 1946 and then the U.S.dollar till 1975 through a fixed exchange rate. It was devalued in September1975 and the system of fixed par rate was replaced with a basket of four majorinternational currencies – the British pound, the U.S. dollar, the Japaneseyen and the Deutsche mark.[235] In 1991, after the collapse of its largest tradingpartner Soviet Union, India faced the major foreign exchange crisis and therupee was devalued by around 19% in two stages on 1 and 2 July. In 1992 aLiberalized Exchange Rate Mechanism – LERMS- was introduced. UnderLERMS exporters had to surrender 40 percent of their foreign exchangeearnings to the RBI at the RBI determined exchange rate. The balance 60% wasallowed to be converted at the market determined exchange rate. In 1994 therupee was convertible on the current account, with some capital controls.[236]

After the sharp devaluation in 1991 and transition to current account convertibilityin 1994, the value of the rupee is largely determined by the market forces. Therupee has been fairly stable during the decade 2000 to 2010. In September2013, the rupee touched an all time low 68.27 to the U.S. dollar.[237]

Income and consumption [edit]

Main article: Income in India

India's gross national income per capita had experienced high growth rates since2002. India's Per Capita Income has tripled from Rs. 19,040 in 2002–03 to Rs.53,331 in 2010–11, averaging 13.7% growth over these eight years peaking15.6% in 2010–11.[239] However

Year Indian per US$(average annual)

1975 8.40581980 7.88001985 12.36401990 17.49921995 32.41982000 44.94012005 44.10002010 45.73932013 58.5515

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Gini Index of India compared to other countriesper World Bank data tables as of 2014.[238]

Per capita gross national income of India in2013 compared to other countries, on PurchasingPower Parity basis, per World Bank data.[246]

growth in the inflation adjustedPer capita income of the nationslowed to 5.6% in 2010–11,down from 6.4% in the previousyear. These consumption levelsare on an individual basis, nothousehold.[240] On a householdbasis, the average income inIndia was $6,671 per householdin 2011.[241]

Per 2011 census, India has about 330 million houses and 247 millionhouseholds. The household size in India has dropped in recent years, with 2011census reporting 50% of households have 4 or less members. The average per2011 census was 4.8 members per household, and included survivinggrandparents.[242][243] These households produced a GDP of about$1.7 Trillion.[244] The household consumption patterns per 2011 census:approximately 67% of households use firewood, crop residue or cow dung cakesfor cooking purposes; 53% do not have sanitation or drainage facilities onpremises; 83% have water supply within their premises or 100 metres from theirhouse in urban areas and 500 metres from the house in rural areas; 67% of thehouseholds have access to electricity; 63% of households have landline ormobile telephone connection; 43% have a television; 26% have either a twowheel (motorcycle) or four wheel (car) vehicle. Compared to 2001, these incomeand consumption trends represent moderate to significantimprovements.[242] One report in 2010 claimed that the number of high incomehouseholds has crossed lower income households.[245]

Poverty

Main article: Poverty in India

The World Bank in 2010, usingits older 2005 methodology,estimated about 400 millionpeople in India, as compared to1.29 billion people worldwide,live on less than $1.25 (PPP)per day. The World Bankreviewed and proposedrevisions in May 2014, to its poverty calculation methodology and purchasingpower parity basis for measuring poverty worldwide, including India. According tothis revised methodology, the world had 872.3 million people below the newpoverty line, of which 179.6 million people lived in India. In other words, Indiawith 17.5% of total world's population, had 20.6% share of world's poorest in2013.[11] According to a 2005-2006 survey,[247] India had about 61 million

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children under the age of 5 who were chronically malnourished. A 2011 UNICEFreport stated that that between 1990 to 2010, India achieved a 45 percentreduction in under age 5 mortality rates, and now ranks 46 in 188 countries onthis metric.[248]

Since the early 1950s, successive governments have implemented variousschemes to alleviate poverty, under central planning, that have met with partialsuccess.[249] In 2005, Indian government enacted the Mahatma Gandhi NationalRural Employment Guarantee Act, guaranteeing 100 days of minimum wageemployment to every rural household in all the districts of India.[250] In 2011, thisRural Employment Guarantee programme was widely criticised as no moreeffective than other poverty reduction programs in India. Despite its bestintentions, MGNREGA is beset with controversy about corrupt officials, deficitfinancing as the source of funds, poor quality of infrastructure built under thisprogram, and unintended destructive effect on poverty.[251][252][253] Other studiessuggest that the Rural Employment Guarantee welfare program has helped inreducing rural poverty in some cases.[254][255] Yet other studies report that India'seconomic growth has been the driver of sustainable employment and povertyreduction, but a sizable population remains in poverty.[256][257]

Employment [edit]

See also: Labour in India, Indian labour law and Child labour in India

Agricultural and allied sectors accounted for about 52.1% of the total workforce in2009–10. While agriculture employment has fallen over time in percentage oflabor employed, services which includes construction and infrastructure haveseen a steady growth accounting for 20.3% of employment in 2012-13.[13] Of thetotal workforce, 7% is in the organised sector, two-thirds of which are in thegovernment controlled public sector.[258] About 51.2% of the labor in India is self-employed.[13]According to 2005-06 survey, there is a gender gap in employmentand salaries. In rural areas, both men and women are primarily self-employed,mostly in agriculture. In urban areas, salaried work was the largest source ofemployment for both men and women in 2006.[259]

Unemployment in India is characterised by chronic (disguised) unemployment.Government schemes that target eradication of both poverty and unemployment(which in recent decades has sent millions of poor and unskilled people intourban areas in search of livelihoods) attempt to solve the problem, by providingfinancial assistance for setting up businesses, skill honing, setting up publicsector enterprises, reservations in governments, etc. The decline in organisedemployment due to the decreased role of the public sector after liberalisation hasfurther underlined the need for focusing on better education and has also putpolitical pressure on further reforms.[260][261] India's labour regulations are heavyeven by developing country standards and analysts have urged the governmentto abolish or modify them in order to make the environment more conducive for

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Commercial office buildingsinGurgaon.

employment generation.[262][263] The 11th five-year plan has also identified theneed for a congenial environment to be created for employment generation, byreducing the number of permissions and other bureaucratic clearancesrequired.[264] Further, inequalities and inadequacies in the education systemhave been identified as an obstacle preventing the benefits of increasedemployment opportunities from reaching all sectors of society.[265]

Child labour in India is a complex problem that is basically rooted in poverty. TheIndian government has implemented, since the 1990s, a variety of programs toeliminate child labor. These have included setting up schools, launching freeschool lunch program, setting up special investigation cells andothers.[266][267] Desai et al. state that recent studies on child labour in India havefound some pockets of industries in which children are employed, but overall,relatively few Indian children are employed. Child labor below the age of 10 isnow rare. In the 10-14 group, the latest surveys find only 2% of children workingfor wage, while another 9% work within their home or rural farms assisting theirparents in times of high work demand such as sowing and harvesting ofcrops.[268]

India has the second largest diaspora around the world, an estimated 25 millionpeople,[269] many of whom work overseas and remit funds back to their families.The Middle East region is the largest source of employment of expat Indians.The crude oil production and infrastructure industry of Saudi Arabia employsover 2 million expat Indians. Cities such as Dubai and Abu Dhabi in United ArabEmirates alone have employed another 2 million Indian construction workersduring its construction boom in recent decades.[270] In 2009–10, remittances from Indian migrants overseas stood at 2500 billion (US$41 billion), the highest in the world, but their share in FDI

remained low at around 1%.[271]

Economic trends and issues [edit]

With 1.2 billion people and theworld’s fourth-largest economy,India’s recent growth anddevelopment has been one ofthe most significantachievements of our times. Overthe six and half decades sinceindependence, the country hasbrought about a landmarkagricultural revolution that hastransformed the nation fromchronic dependence on grainimports into a global agricultural

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powerhouse that is now a netexporter of food. Life expectancyhas more than doubled, literacyrates have quadrupled, healthconditions have improved. Indiawill soon have the largest andyoungest workforce the worldhas ever seen. At the sametime, the country is in the midstof a massive wave ofurbanization as some 10 millionpeople move to towns and citieseach year in search of jobs andopportunity. It is the largestrural-urban migration of thiscentury. Massive investmentswill be needed to create the jobs,housing, and infrastructure tomeet soaring aspirations andmake towns and cities morelivable and green.

— World Bank: "India CountryOverview 2013"[272]

Agriculture [edit]

Main article: Agriculture in India

Agriculture is an important part of Indian economy. In 2008, a New York Timesarticle claimed, with the right technology and policies, India could contribute tofeeding not just itself but the world. However, agricultural output of India lags farbehind its potential.[273] The low productivity in India is a result of several factors.According to the World Bank, India's large agricultural subsidies are distortingwhat farmers grow and they are hampering productivity-enhancing investment.While overregulation of agriculture has increased costs, price risks anduncertainty, governmental intervention in labour, land, and credit markets arehurting the market. Infrastructure such as rural roads, electricity, ports, foodstorage, retail markets and services are inadequate.[274] Further, the averagesize of land holdings is very small, with 70% of holdings being less than onehectare in size.[275] Irrigation facilities are inadequate, as revealed by the factthat only 39% of the total cultivable land was irrigated as of 2010,[103] resulting infarmers still being dependent on rainfall, specifically the monsoon season, whichis often inconsistent and unevenly distributed across the country.[276] Farmerincomes are low also in part because of lack of food storage and distributioninfrastructure. A third of India's agriculture produce is lost from spoilage.[181]

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Perception of corruption index for Indiacompared to other countries, 2010.

Corruption [edit]

Main article: Corruption in India

Corruption has been one of thepervasive problems affecting India.A 2005 study by TransparencyInternational (TI) found that morethan half of those surveyed hadfirsthand experience of paying bribeor peddling influence to get a jobdone in a public office in theprevious year.[277] A follow-on 2008 TI study found this rate to be 40percent.[278] In 2011, Transparency International ranked India at 95th placeamongst 183 countries in perceived levels of public sector corruption.[279]

In 1996, red tape, bureaucracy and the Licence Raj were suggested as a causefor the institutionalised corruption and inefficiency.[280] More recentreports[281][282][283]suggest the causes of corruption in India include excessiveregulations and approval requirements, mandated spending programs,monopoly of certain goods and service providers by government controlledinstitutions, bureaucracy with discretionary powers, and lack of transparent lawsand processes.

The Right to Information Act (2005) which requires government officials tofurnish information requested by citizens or face punitive action, computerisationof services, and various central and state government acts that establishedvigilance commissions, have considerably reduced corruption and opened upavenues to redress grievances.[277]

In 2011, the Indian government concluded that most spending fails to reach itsintended recipients. A large, cumbersome and tumor-like bureaucracy spongesup or siphons off spending budgets.[284] India's absence rates are one of theworst in the world; one study found that 25% of public sector teachers and 40%of government owned public sector medical workers could not be found at theworkplace.[285][286]Similarly, there are many issues facing Indian scientists, withdemands for transparency, a meritocratic system, and an overhaul of thebureaucratic agencies that oversee science and technology.[287]

The Indian economy has an underground economy, with a 2006 report allegingthat the Swiss Bankers Association suggested India topped the worldwide list forblack money with almost $1,456 billion stashed in Swiss banks. This amounts to13 times the country's total external debt.[288][289] These allegations have beendenied by Swiss Banking Association. James Nason, the Head of InternationalCommunications for Swiss Banking Association, suggests "The (black money)figures were rapidly picked up in the Indian media and in Indian oppositioncircles, and circulated as gospel truth. However, this story was a complete

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Economic disparities among the States andUnion Territories of India, on GDP percapita,PPP basis in 2011.

fabrication. The Swiss Bankers Association never published such a report.Anyone claiming to have such figures (for India) should be forced to identify theirsource and explain the methodology used to produce them."[290][291]

Education [edit]

Main article: Education in India

India has made huge progress in terms of increasing primary educationattendance rate and expanding literacy to approximately three-fourths of thepopulation.[292]India's literacy rate had grown from 52.2% in 1991 to 74.04% in2011. The right to education at elementary level has been made one of thefundamental rights under the eighty-sixth Amendment of 2002, and legislationhas been enacted to further the objective of providing free education to allchildren.[293] However, the literacy rate of 74% is still lower than the worldwideaverage and the country suffers from a high dropout rate.[294] Further, theliteracy rates and educational opportunities vary by region, gender, urban andrural areas, and among different social groups.[295][296]

Economic disparities [edit]

Main articles: Economic disparities in India and Poverty in India

Poverty rates in India’spoorest states are threeto four times higher thanthose in the moreadvanced states. WhileIndia’s average annualper capita income was$1,410 in 2011 – placingit among the poorest ofthe world’s middle-incomecountries – it was just$436 in Uttar Pradesh(which has more peoplethan Brazil) and only $294in Bihar, one of India’spoorest states.

— World Bank: IndiaCountry Overview

2013[272]

A critical problem facing India's economy is the sharp and growing regionalvariations among India's different states and territories in terms of poverty,availability of infrastructure and socio-economic development.[297] Six low-incomestates – Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Odisha and Uttar

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Pradesh – are home to more than one-third of India's population.[298] Severedisparities exist among states in terms of income, literacy rates, life expectancyand living conditions.[299]

The five-year plans, especially in the pre-liberalisation era, attempted to reduceregional disparities by encouraging industrial development in the interior regionsand distributing industries across states, but the results have not been veryencouraging since these measures in fact increased inefficiency and hamperedeffective industrial growth.[300] After liberalisation, the more advanced stateshave been better placed to benefit from them, with well-developed infrastructureand an educated and skilled workforce, which attract the manufacturing andservice sectors. The governments of backward regions are trying to reducedisparities by offering tax holidays and cheap land, and focusing more on sectorslike tourism which, although being geographically and historically determined,can become a source of growth and develops faster than othersectors.[301][302] India's income Gini coefficient is 33.9, according to The WorldBank, indicating overall income distribution to be more uniform than East Asia,Latin America and Africa that have higher Gini coefficients.[12]

There is a continuing debate on whether India's economic expansion has beenpro-poor or anti-poor.[303] Studies suggest that the economic growth has beenpro-poor and has reduced poverty in India.[303][304]

Insurance [edit]

India became the 10th largest insurance market in the world in 2013, rising from15th rank in 2011.[305][306] At a total market size of US$ 66.4 billion in 2013, itremains small compared to world's major economies, and Indian insurancemarket accounts for 2% of world's annual insurance business. India's life andnon-life insurance industry has been growing at double digit growth rates andthis growth is expected to continue through 2021.[307]

Life Insurance

Indian economy retains about 360 million active life insurance policies, thelargest in the world.[307] Of the 52 insurance companies in India, 24 are active inlife insurance business. The life insurance industry in the country is projected toincrease at double digit compounded annual growth rates through 2019, withtargets to reach US$ 1 trillion annual notional values by 2021.[307]

Other Insurance

The industry which reported a growth rate of around 10 percent during theperiod 1996–97 to 2000–10 has, post opening up the sector, reported averageannual growth of 15.85% over the period 2001–02 to 2010–11.[citation needed] Inaddition, the specialized insurers Export Credit Guarantee Corporation andAgriculture Insurance Company (AIC) are offering credit guarantee and corpinsurance respectively. AIC, which has initially offering coverage under the

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India portal

Business andeconomics portal

National Agriculture Insurance Company (NAIS), has now started providing cropinsurance cover on commercial line as well.[citation needed] It has introducedseveral innovative products such as weather insurance and specific crop relatedproducts. The premium underwritten by the non life insurers during 2010–11 wasRs 42,576 crore as against Rs 34,620 crore in 2009–10. The growth wassatisfactory, particularly in the view of the across the broad cuts in the tariff rates.The private insurers underwrote premium of Rs 17,424 crore as against rs Rs13,977 crore in 2009–10. The public sector insurers on the other hand,underwrote a premium of Rs 25,151.8 in 2010–11 as against Rs 20,643.5 crorein 2009–10, i.e. a growth of 21.8% as against 14.5% in 2009–10.[citation needed]

Market Penetration

The Indian insurance business has in the past remained under developed withlow levels of insurance penetration. Post liberalization sector has succeeded inraising the levels of insurance penetration from 2.3 (life 1.8 and non life 0.7) in2000 to 5.1 (life 4.4 and non life 0.7) in 2010.[citation needed]

Security Markets [edit]

The development of Indian security markets began with launch of Bombay StockExchange (BSE), Mumbai in July 1875 and Ahmedabad Stock exchange in 1894and 22 other exchange in various cities over the years. In 2014, India's stockexchange market became the 10th largest in the world by market capitalization,just above those of South Korea and Australia.[308] India's two major stockexchanges, BSE andNational Stock Exchange of India, had a marketcapitalization of US$1.4997 trillion and US$1.4722 trillion respectively as of June2014, according to World Federation of Exchanges.[309]

The Initial Public Offering (IPO) market in India has been small compared toNYSE and NASDAQ, raising US$300 million in 2013 and US$1.4 billion in 2012.Ernst and Young states[310] that the low IPO activity reflects market conditions aswell as slow government approval process and complex regulations. Before2013, Indian companies were not allowed to list their securities internationallywithout first completing an IPO in India. In 2013, these security laws werereformed and Indian companies can now choose where they want to list first -overseas, domestically, or concurrently.[311] Further, security laws have beenrevised to ease overseas listings of already listed companies, to increase liquidityfor private equity and international investors in Indian companies.[310]

See also [edit]

Economic Advisory Council

Economic development in India

Events:

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Late-2000s recessionOil price increases since 2003

Lists:

List of companies of India

List of the largest trading partners of IndiaIncome in India

Trade unions in IndiaEconomic history of IndiaMinerals in India

Notes [edit]

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References [edit]

Books

Datt, Ruddar; Sundharam, K.P.M. (2009). Indian Economy. New Delhi: S. ChandGroup. p. 976. ISBN 978-81-219-0298-4.

Drèze, John; Sen, Amartya (1996). India: Economic Development and SocialOpportunity. Oxford University Press. p. 292. ISBN 978-0-19-564082-3.Iftikhar-ul-Awwal, A. Z. M. (1982) The Industrial Development of Bengal, 1900-1939 Vikas Publishing House: New Delhi, 1982, Pages: 256, ISBN 0706915798Kumar, Dharma (2005). The Cambridge Economic History of India, Volume II : c.1757–2003. New Delhi: Orient Longman. p. 1115. ISBN 978-81-250-2710-2.

Nehru, Jawaharlal (1946). The Discovery of India. Penguin Books. ISBN 0-14-303103-1.Panagariya, Arvind (2008). India: The Emerging Giant. Oxford University Press.p. 514.ISBN 978-0-19-531503-5.Raychaudhuri, Tapan; Habib, Irfan (2004). The Cambridge Economic History of India,Volume I : c. 1200 – c. 1750. New Delhi: Orient Longman. p. 543. ISBN 978-81-250-2709-6.Roy, Tirthankar (2006). The Economic History of India 1857–1947. Oxford UniversityPress. p. 385. ISBN 978-0-19-568430-8.

Papers and reports

"Economic reforms in India: Task force report" (PDF). University of Chicago.p. 32."Economic Survey 2009–10" . Ministry of Finance, Government of India. p. 294.

Further reading [edit]

Books

Alamgir, Jalal (2008). India's Open-Economy Policy. Routledge. ISBN 978-0-415-77684-4.Bharadwaj, Krishna (1991). "Regional differentiation in India". In Sathyamurthy,T.V.Industry & agriculture in India since independence. Oxford University Press.pp. 189–199.ISBN 0-19-564394-1.

Articles

Finance, Government of India (October, 2014)307. ^ a b c IBEF, Insurance Sector in India April 2014 Industry Report

308. ^ ‘Modi Mania’ propels India’s stock market into world’s top 10 The FinancialTimes (22 May 2014)

309. ^ Latest Statistics of Stock Exchanges Worldwide WFE (July 2014), seecomplete report for 2014-June

310. ^ a b EY Global IPO Trends Global IPO Trends Q4 2013 Ernst & Young(2014)

311. ^ Listing abroad sans domestic IPO set to be a reality soon BusinessStandard (28 July 2013)

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Wikimedia Commons hasmedia related to Economy ofIndia.

Wikiquote has quotationsrelated to: Economy of India

"Growth of India" . Retrieved 2005-08-10."Milton Friedman on the Nehru/Mahalanobis Plan" . Retrieved 2005-07-16.

"Infrastructure in India: Requirements and favourable climate for foreigninvestment" . Retrieved 2005-08-14.Bernardi, Luigi and Fraschini, Angela (2005). "Tax System And Tax Reforms inIndia" . Working paper n. 51.Centre for Media Studies (2005). "India Corruption Study 2005: To ImproveGovernance Volume – I: Key Highlights" (PDF). Transparency International India.Retrieved 2009-06-21.Ghosh, Jayati. "Bank Nationalisation: The Record" . Macroscan. Retrieved 2005-08-05.

Gordon, Jim and Gupta, Poonam (2003). "Understanding India's ServicesRevolution" (PDF). 12 November 2003. Retrieved 2009-06-21.Panagariya, Arvind (2004). "India in the 1980s and 1990s: A Triumph of Reforms" .Sachs, D. Jeffrey; Bajpai, Nirupam and Ramiah, Ananthi (2002). "UnderstandingRegional Economic Growth in India" (PDF). Working paper 88. Archived from theoriginal on 1 July 2007.

Srinivasan, T.N. (2002). "Economic Reforms and Global Integration" (PDF). 17January 2002. Retrieved 2009-06-21.Kurian, N.J. "Regional disparities in india" . Retrieved 2005-08-06.

News

Ravi S Jha. "India, the Goliath, Falls with a Thud" .

"India says 21 of 29 states to launch new tax" . Daily Times. 25 March 2005."Economic structure" . The Economist. 6 October 2003.a"Regional stock exchanges – Bulldozed by the Big Two" . Retrieved 2005-08-10.

"FinMin considers three single-brand retail FDI proposals" .

External links [edit]

Government of India websites

Ministry of Finance, Government ofIndiaDepartment of Commerce,Government of India

Department of Industrial Policy &PromotionOffice of the Economic AdviserIndia in Business - Official website for Investment and Trade in India

Union Budget & Economic SurveyIncome Tax Department of India

Central Board of Excise and CustomsReserve Bank of India's database on the Indian economy

Publications and statistics

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