The Indian economy is going through a burgeoning growth phase, propelled by increased consumerism. Economy of India is rise and shining. In terms of purchasing power parity(PPP) India ranks fourth in the world, with only USA, China and Japan ahead of it(source: IMF). According to the World Bank estimates of 2006, in terms of GDP(nominal), India ranks twelfth in the world with a GDP of $906,268 million. India's GDP grew by 9.4 percent during 2006-07, which was an improvement over the already impressive GDP growth rate of 9 percent in the 2005-06 fiscal, and 7.5 percent in the 2004-05 fiscal. By 2025, India's economy is projected to be 60 percent of the size of the US economy. In 2006, the estimated per capita GDP in terms of purchasing power parity was $3800.Despite the significant increase in private enterprises in the recent times, thanks to liberalization of the Indian economy, some one-and-a-half decades back, we still remain, by and large, a mixed economy.
A mixed economy is an economic system where both free market forces and state control in pricing and production co-exist; where the means of production and services are controlled both by the private and the public sectors. In terms of employment, the economy of India has primarily been agrarian in its focus and character, and despite the continuing boom in the service sector in the recent times, it continues to remain so.
Economy of India
The Indian Culture of Agriculture However, in terms of GDP it is fast losing ground to the services sector. As late as 2005, agriculture accounted for 60 percent of the country's labour force, though it constituted only 18.6 percent of the country's GDP. The 2006 estimates show that agriculture accounted for 19.9 percent of India's GDP, whereas during the same year, services sector accounted for 60.7 percent of India's GDP, with industry accounting for a share of 19.3 percent of GDP. Agriculture is no longer the backbone of Indian economy, as it was in the early years of its independence,and also in the sixties, seventies and eighties, but it is still the major source of livelihood in India, and as such must be given its due importance. India's primary agricultural produce are milk, tea, ginger, cashew nuts, black pepper, turmeric, wheat, rice, tobacco, oilseed, cotton, jute, sugar, sugarcane, groundnut, inland fish and cattle.
In the seventies, we experienced Green Revolution and Milk Revolution, which have positively influenced the agricultural climate in India and caused boom in Indian economy, but still much needs to be done. Indian agriculture is showing signs of revival, after a period of stagnation during the late nineties. During the tenth plan period(2002-07), India's agricultural production has shown an average annual growth rate of 2.5 percent. However, India's agricultural productivity can show further enhancement, and the gnawing poverty of the farmers can be reduced, if proper land reforms and technologies are being deployed in the Indian agriculture on a stringent basis, and if agricultural laborers are given interest-free credit, as a part of agricultural policy of the states.
Textiles, chemicals, food processing, steel, transportation equipments, cement, mining, petroleum, and software are some of the major industries, playing pivotal role in the economy of India. India's major mineral resources include coal (fourth-largest reserves in the world), iron ore, mica, manganese, bauxite, natural gas, thorium, chromite, limestone and petroleum. All these propel the industrial growth of Indian economy. India's industrial sector is also making successful inroads and is making its presence felt in the global arena. India had experienced an industrial growth of 11.3 percent in 2006-07 as compared to 8.2 percent in its previous fiscal. This was India's highest industrial growth since 1995-96.
The manufacturing sector accounts for more than 80 percent of industrial production in India, and its growth is an ample indicator of the industrial health of India. The manufacturing sector of India had grown from 6 per cent in 2002-03 to 12.3 percent in 2006-07. In March 2007, it experienced a growth of 14.1 percent- the highest growth of Indian manufacturing sector in a decade- as compared to 10.1 percent growth in the corresponding period of the last year. The fact that six Indian corporations have made it to the Fortune Global 500 list for the year 2006, is an ample reflection of resurgence of economy of India and its enviable progress in the industrial sector. The six corporations are Indian Oil Corporation Ltd., Reliance Industries Ltd., Bharat Petroleum Corporation Ltd., Hindustan Petroleum Corporation Ltd., Oil and Natural Gas Corporation Ltd. and State Bank of India Ltd.
IT's the Story of Service
From the above-mentioned statistics, there is no denying the fact that India's service sector is experiencing an unprecedented growth, which is having direct impact on Indian economy and promising new vistas for the new-age professionals, but is also propelling India into the status of a knowledge superpower and taking economy of India to the road of advancement. Though services sector accounts less than one third of India's labour force, it generates more than half of India's output. As a result of its huge supply of skilled and cheap manpower, in this era of globalisation, where geography is fast getting translated into history, India has emerged as the number one destination for 'back office' operations of global conglomerates, which are outsourcing their customer services and technical support services to India. All this in turn has worked wonders for Indian economy.
The economy of India is growing leaps and bounds. The success story of the services sector in India, in the recent past, is built on the edifice of its skilled and cost-effective human resource in the software industry, whose services have great demand in the western markets. IT is making India a knowledge economy to reckon with. However, the recent BPO (business process outsourcing) revolution, whose most public face is the mushrooming of the call centers, the biotechnology and pharmaceutical sectors have also contributed to India's reputation as the leading exporter of skilled human resource to the west and bringing Indian economy into the limelight.
Besides the availability of skilled and fluent in English manpower and its consequent demand in the western markets(particularly the US markets), the impressive infrastructure in the services sector is another cause for its huge growth in India. All these have spearheaded an outsourcing boom in the west, with its main base being India. Indian services sector has come a long way since the days of early years of independence; it contributed only 15 percent to the Indian GDP in 1950, whereas in 2005, it contributed 53.8 percent to India's GDP.
Trade and Investment
India's balance of trade has also shown impressive performance since liberalization of Indian economy in 1991. Though the balance of payments(on the current account) continues to be negative, India's exports have been steadily rising since liberalization. India's foreign currency reserves in 2005-06 was an impressive $141 billion, which has further increased to $200 billion. These foreign reserves can in turn fuel India's growth and development. India's dependence on external assistance and commercial borrowings has showed welcome decreases since 1991-92, and since 2002-03, it has gradually been repaying these debts. India's exports stood at $125 billion during 2006-07, whereas the 2006 estimates of India's imports were $187.9 billion. India's major trading partners are the USA, China, the UAE, the UK, Singapore, Hong Kong and the EU. Besides skilled human resource, the main export items of India are textile products, gems and jewelry, engineering goods, chemicals and leather manufactures, whereas the main imported products of India are crude oil, gems, fertilizers, chemicals and machinery.
Economy of India is booming and also emerging as a major player in attracting foreign direct investment (FDI). In the pre-liberalization era, India's rigid FDI policies and increased red-tapism were a deterrent for the foreign investors, but since liberalization of its economy, India is becoming a preferred destination for foreign investors. India's recently liberalized FDI policy in 2005, allows up to a 100 percent FDI stake in ventures, which is expected to increase FDI inflows to a great extent. Furthermore, industrial policy reforms have substantially reduced the rigmarole of industrial licensing requirements, and removed a lot many restrictions, which have together facilitated easy access to foreign technology and foreign direct investments.
The Lacunae of Indian Economy
However, everything is not hunky dory with the Indian economy at present, despite its successes in many areas. The estimated inflation in 2006 was 5.3 percent, is quite disturbing for economy of India. The distribution of income is also quite unequal with top 10 percent of income group accounting for 33 percent of the income. Still more than 75 percent of Indians live at less than Rs.20 a day, and 17.59 percent of Indian population lives below the poverty line. The unemployment, though reduced, is still numbering in lakhs. Child labour, though illegal, is still very much rampant in India. Unless we address these daunting challenges on a war footing, Indian economy cannot reach the twenty-first century in true sense, despite its impressive infrastructure investments and successes in the IT revolution.
Last Updated On: 2011/07/04