The economy of India is the 11th largest in the world by nominal GDP and the 3rd largest by purchasing power parity . The country is one of the G-20 major economies and a member of BRICS. On a per capita income basis, India ranked 140th by nominal GDP and 129th by GDP (PPP) in 2011, according to the IMF.
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After the independence-era Indian economy was inspired by the Soviet model of economic development, with a large public sector, high import duties combined with interventionist policies, leading to massive inefficiencies and widespread corruption. However, later on India adopted free market principles and liberalized its economy to international trade.
India recorded the highest growth rates in the mid-2000s, and is one of the fastest-growing economies in the world. India has recorded a growth of over 200 times in per capita income in a period from 1947 (Rs 249.6) to 2011. The growth was led primarily due to a huge increase in the size of the middle class consumer, a large labour force, growth in the manufacturing sector due to rising education levels and engineering skills and considerable foreign investments. India is the nineteenth largest exporter and tenth largest importer in the world. Economic growth rate stood at around 6.5% for the 2011-12 fiscal year.
Overview Indian economy
A combination of protectionist, import-substitution, and Fabian socialist-inspired policies governed India for sometime after the end of British occupation. The economy was then characterized by extensive regulation, protectionism, public ownership, pervasive corruption and slow growth. Since 1991, continuing economic liberalization has moved the country towards a market-based economy.
By 2008, India had established itself as one of the world’s fastest growing economies. Growth significantly slowed to 6.8% in 2008-09, but subsequently recovered to 7.4% in 2009-10, while the fiscal deficit rose from 5.9% to a high 6.5% during the same period.
India’s current account deficit surged to 4.1% of GDP during Q2 FY11 against 3.2% the previous quarter. The unemployment rate for 2010-11, according to the state Labour Bureau, was 9.8% nationwide. As of 2011, India’s public debt stood at 68.05% of GDP which is highest among the emerging economies. However, inflation remains stubbornly high with 6.87% in July 2012, the highest among its BRICS counterparts.
India’s large service industry accounts for 57.2% of the country’s GDP while the industrial and agricultural sectors contribute 28.6% and 14.6% respectively. Agriculture is the predominant occupation in Rural India, accounting for about 52% of employment. The service sector makes up a further 34%, and industrial sector around 14%. 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%.
Major industries include telecommunications, textiles, chemicals, food processing, teel, transportation equipment, cement, mining, petroleum, machinery, software and pharmaceuticals. The labour force totals 500 million workers. Major agricultural products include rice, wheat, oilseed, cotton, jute, tea, sugarcane, potatoes, cattle, water buffalo, sheep, goats, poultry and fish. In 2010-2011, India’s top five trading partners are United Arab Emirates, China, United States, Saudi Arabia and Germany.
A closed economy, India’s trade and business sector has grown fast. 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. In the year 2010-11 India’s total merchandise trade (counting exports and imports) stands at $ 606.7 billion and is currently the 9th largest in the world. During 2011-12, India’s foreign trade grew by an impressive 30.6% to reach $ 792.3 billion (Exports-38.33% & Imports-61.67%).
Economic progress in India:-
The economic development in India followed socialist-inspired policies for most of its independent history, including state-ownership of many sectors; extensive regulation and red tape known as “License”; and isolation from the world economy. India’s per capita income increased at only around 1% annualized rate in the three decades after Independence. Since the mid-1980s, India has slowly opened up its markets through economic liberalization. After more fundamental reforms since 1991 and their renewal in the 2000s, India has progressed towards a free market economy.
The economic growth has been driven by the expansion of services that have been growing consistently faster than other sectors. It is argued that the pattern of Indian development has been a specific one and that the country may be able to skip the intermediate industrialization-led phase in the transformation of its economic structure. Serious concerns have been raised about the jobless nature of the economic growth.
Favorable macroeconomic performance has been a necessary but not sufficient condition for the significant reduction of poverty among the Indian population. The rate of poverty decline has not been higher in the post-reform period (since 1991). The improvements in some other non-economic dimensions of social development have been even less favorable. The most pronounced example is an exceptionally high and persistent level of child malnutrition (46% in 2005-2006).
The progress of economic reforms in India is followed closely. The World Bank suggests that the most important priorities are public sector reform, infrastructure, agricultural and rural development, removal of labor regulations, reforms in lagging states, and HIV/AIDS. For 2010, India ranked 133rd in Ease of Doing Business Index, which is setback as compared with China 89th and Brazil 129th. According to Index of Economic Freedom World Ranking an annual survey on economic freedom of the nations, India ranks 124th as compared with China and Russia which ranks 140th and 143rd respectively in 2010.
India ranks second worldwide in farm output. Agriculture and allied sectors like forestry, logging and fishing accounted for 18.6% of the GDP in 2005, employed 60% of the total workforce and despite a steady decline of its share in the GDP, is still the largest economic sector and plays a significant role in the overall socio-economic development of India. Improvements in irrigation, technology, application of modern agricultural practices and provision of agricultural credit and subsidies since the green revolution.
India is the largest producer in the world of milk, cashew nuts, coconuts, tea, ginger, turmeric and black pepper. It also has the world’s largest cattle population (193 million).It is the second largest producer of wheat, rice, sugar, groundnut and inland fish. It is the third largest producer of tobacco. India accounts for 10% of the world fruit production with first rank in the production of banana and sapota.
The required level of investment for the development of marketing, storage and cold storage infrastructure is estimated to be huge. The government has implemented various schemes to raise investment in marketing infrastructure.
Research and development
The Indian Agricultural Research Institute (IARI), established in 1905, was responsible for the research leading to the “Indian Green Revolution” of the 1970s. The Indian Council of Agricultural Research (ICAR) is the apex body in kundiure and related allied fields, including research and education. The Union Minister of Agriculture is the President of the ICAR. The Indian Agricultural Statistics Research Institute develops new techniques for the design of agricultural experiments, analyses data in agriculture, and specializes in statistical techniques for animal and plant breeding.
India is 14th in the world in factory output. Manufacturing sector in addition to mining, quarrying, electricity and gas together account for 27.6% of the GDP and employ 17% of the total workforce. Economic reforms introduced after 1991 brought foreign competition, led to privatization of certain public sector industries, opened up sectors hitherto reserved for the public sector and led to an expansion in the production of fast-moving consumer goods.
Post-liberalization, the Indian private sector, which was usually run by oligopolies of old family firms and required political connections to prosper was faced with foreign competition, including the threat of cheaper Chinese imports. It has since handled the change by squeezing costs, revamping management, focusing on designing new products and relying on low labour costs and technology. The Indian market offers endless possibilities for investors.
India is fifteenth in services output. Service industry employ English-speaking workers on the supply side and on the demand side, has increased demand from foreign consumers interested in India’s service exports or those looking to outsource their operations. India’s IT industry, despite contributing significantly to its balance of payments, accounts for only about 1% of the total GDP or 1/50th of the total services.
Within this sector and events, the ITES-BPO sector has become a big employment generator especially amongst young college graduates. The number of professionals employed by IT and ITES sectors is estimated at around 1.3 million as on March 2006. Also, Indian IT-ITES is estimated to have helped create an additional 3 million job opportunities through indirect and induced employment.
GDP growth rate
Since the economic liberalization of 1991, India’s GDP has been growing at a higher rate.
Indian economy to flourish, throw out this corrupt regime. Why?
India’s Flourishing Economy
Corruption, absence of leadership and policy paralysis are the three main reasons for the economic down-turn India is facing today, according to the three international rating agencies – Standard and Poor, Moody’s and Fitch. It is not too important that these agencies have identified the malaise of Indian polity, which in these columns we have been repeatedly highlighting for the past seven years. These rating agencies have gone totally wrong in predicting the financial crisis in the West and the on-going economic decline in the European countries. Hence their ratings are not as important as their comments.
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The India as a vibrant democracy needs an elected representative of the people and not a prop nominated by a power that is outside the government sans accountability.Corruption has reached unprecedented levels. This is draining away so much of the nation’s resources, which rightfully should have been shared by all the citizens.
The expose on defense deals shows that the public money has been swindled by crooks who were responsible for the purchase of arms and ammunition for the army.
In the oil sector, the government has allotted whimsically rich wells, after declaring them unviable. Magically, the private purchasers have hit gold at the first digging. Some of the largest oil sources have gone into private hands, from the government by such means. And senior officials and geologists in the public sector oil companies have landed plum job in these private enterprises.
Due to the lack of congenial economic atmosphere at home, Indians are investing huge amounts of money abroad, in properties, mines and companies. The UPA government and their sponsors are harping on the non-passage of some bills as primary reasons for the economic slide. It is as though the Pension Bill, Banking Bill and the Insurance Bill, all opening the Indian money to foreign and private players are a magic wand that would pull rabbits out of hats.
India has lost the confidence of the investors mainly because of the high levels of corruption prevailing in the government. Indian economy has no deliverance unless the present corrupt regime is booted out and the culprits put behind bars for treason and loot.
The lack of good infrastructure, especially roads and airways is a blot on the India Shining concept, and Indian political will is yet to manifest itself aggressively to compete in this area. Chaos and traffic congestion increase business time and this is seen as one of the biggest dampeners to the international desire to invest in the country. It is necessary to remember that a great democracy can walk the path to great power only on the basis of a strong infrastructure system.
On the other hand, the country has witnessed a consistent growth at eight per cent from 2003-2006. With the added reservoir of youth in the country today, India seems to be indeed shining, in different terms. The youth brings with it newer and more advanced knowledge, technological know-how, and an aggression that was not encouraged by earlier, more sober and rigid social and government systems. The manufacturing industry is on a roll once again, banks have jacked up their efficiency to cater to demanding customers, and private entrepreneurship has found a new lease of life from the government’s policies.
What can that country’s Govt. do to the economy flourish?
Corruption, absence of leadership and policy paralysis are the three main reasons for the economic down-turn India is facing today, according to the three international rating agencies – Standard and Poor, Moody’s and Fitch. It is not too important that these agencies have identified the malaise of Indian polity, which in these columns we have been repeatedly highlighting for the past seven years. These rating agencies have gone totally wrong in predicting the financial crisis in the West and the on-going economic decline in the European countries.
Corruption has reached unprecedented levels. This is draining away so much of the nation’s resources, which rightfully should have been shared by all the citizens. Due to the lack of congenial economic atmosphere at home, Indians are investing huge amounts of money abroad, in properties, mines and companies.
According to a recent report, Indians are among the top property buyers in the US, next only to the Canadians. Indian companies are taking over foreign companies, creating job opportunities abroad, while the unemployment rates are ballooning in India .Indian economy has no deliverance unless the present corrupt regime is booted out and the culprits put behind bars for treason and loot.
Indian economic rules and regulations are absolutely right. There is a problem in implementing the rules. According to me, Indian economy is still in the condition of OLD WINE IN NEW BOTTLE. India is still operating at a slow pace, using the old methods, techniques, habits, policies, processes, etc.
Indian economy may not be developed when compared to European nation but firm base of indian economy makes a nation which can withstand global crisis. Indian banking policies are firm. When global economy was under crisis India maintained its development steadily.
The major parameters that determine the foundation of Indian economy. Let me just list out the few parameters which forms the basics of Indian economy.
1. Education – This is the top priority of India right now. Because, everybody knows, India is second largest populated country in the world. Population one of indian strengths should be directed in the right way to achieve maximum efficiency. Therefore, to move this population in the right track, EDUCATION is MUST.
2. Electricity – This is the basic criteria to run any industry. At present there is a huge gap of supply and demand in electricity. The economy of India mainly depends on Industries and their growth. To improve the industrial efficiency, ELECTRICITY is MUST.
3. Infrastructure – This is another important criteria of Indian economy. If other developed nations, their infrastructure is way ahead if compare it in India. Therefore, India must lay concentration in infrastructure if India to be a developed nation. Therefore INFRASTRUCTURE is MUST.
4. Governing body – As we all know, India have a good administration to have a good control over all the rules and regulations prevailing in India. The rules need to be more stringent and all corrupts should be punished. Here there is a lot of scope to be improved. Therefore GOVERNING BODY is MUST.
5. Agriculture – Basically India is a Agricultural country. But now agriculture is under prioritized and all the agricultural lands are turning out to be commercial lands. This trend must change. All Indian newly invented technologies should be used to bring agricultural reforms. Therefore AGRICULTURE is MUST.
6. Resources must be routed properly – India is still having a lot of resources to be utilized and it must be properly routed. For instance electricity is wasted in many ways like electricity thefts, subsidy for electricity for farmers. These things can not be done when there is a scarcity of electricity. Therefore all the resources must be routed properly.
The Indian economy was on a cyclical slowdown after a five-year record boom and there are reasonable expectations that the economy will go for another strong growth phase after this brief slowdown. The impact of the current global crisis on India has been significant in terms of fiscal imbalances and the lower GDP growth rate, though India did not have direct exposure to sub-prime assets. It also dealt a severe blow to investment sentiments and consumer confidence in the economy. The policy response so far has been prompt in the form of monetary easing and fiscal expansion. However, this has sharply reversed the steady fiscal improvement over the past five years and weakened public finances considerably. This phase of fiscal expansion has to be wound down to ensure that macroeconomic stability is not threatened and the economy does not suffer from entrenched inflationary expectations and high capital costs, both of which will adversely impact the potential growth rate. Thus, an exit strategy will have to be carefully designed.
The objective of economic policy must be to maximize gains from global integration while ensuring a reduction in poverty and inequity. Therefore, a better way of responding to the crisis is to start the “second round of reforms” that are now overdue. The focus must now shift to promoting private investment, which can alone sustain rapid growth.