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Economy of India

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According to the International Monetary Fund (IMF), the Indian economy in 2017 was nominally worth US$2.454 Trillion; it is the sixth- largest economy by market exchange rates, and is, at US$9.489 Trillion, the third largest by purchasing power parity, or PPP. With its average annual GDP growth rates of 5.8% over the past two decades, and reaching 6.1% during 2011-12, India is one of the world’s fastest-growing economics. However, the country ranks 140th in the world in nominal GDP per capita and 129th in GDP per capita at PPP. Until 1991, all Indian governments followed protectionist policies that were influenced by socialist economics. Widespread state intervention and regulation largely walled the economy off from the outside world. An acute balance of payments crisis in 1991 forced the nation to liberalise its economy; since then it has slowly moved towards a free-market system by emphasizing both foreign trade and direct investment inflows. India has been a member of WTO since 1 January 1995.

The 513.7 million-worker Indian labour force is the world’s second largest, as of 2016. The service sector makes up 55.6% of GDP, the industrial sector 26.3% and the agricultural sector 18.1%. India’s foreign exchange remittance of US$70 billion in 2014, the largest in the world, contributed to its economy by 25 million Indians working in foreign countries. Major agricultural products include rice, wheat, oilseed, cotton, jute, tea, sugarcane, and the potatoes. Major industries include textiles, telecommunications, chemicals, pharmaceuticals, biotechnology, food processing, steel, transport equipment, cement, mining, petroleum, machinery, and software. In 2006, the share of external trade in India’s GDP stood at 24%, up from 6% in 1985. In 2008, India’s share of world trade was 1.68%; In 2011, India was the world’s tenth-largest importer and the nineteenth-largest exporter. Major exports include petroleum products, textile goods, jewellery, software, engineering goods, chemical and leather manufactures. Major imports include crude oil, machinery, gems, fertilizer, and chemicals. Between 2001 and 2011, the contribution of petrochemical and engineering goods to total exports grew from 14% to 42%. India was the second largest textile exporter after China in the world in calendar year 2013.    

Average an economic growth rate of 7.5% for several years prior to 2007. India has more than doubled its hourly wage rates during the first decade of the 21th century. Some 431 million Indians have left poverty since 1985; India’s middle classes are projected to number around 580 million by 2030. Through ranking 51st in global competitiveness, India ranks 17th in financial market sophistication, and 24th in the banking sector, 44th in business sophistication, and 39th in innovation, ahead of several advanced economies, as of 2010. With 7 of the world’s top 15 information technology outsourcing companies based in India, the country is viewed as the second-most favourable outsourcing destination after the United States, as of 2009. India’s consumer market, the worlds eleventh-largest, is expected to become fifth-largest by 2030.

Driven by growth, India’s nominal GDP per capita has steadily increased from US$ 329 in 1991, when economic liberalization began, to US$ 1,265 in 2010, to an estimated US$ 2,358 by 2020; however, it has remained lower than those of other Asian developing countries such as Indonesia, Malaysia, Philippines, Sri Lanka and Thailand and is expected to remain so in the near future. However, it is higher than Pakistan, Nepal, Afghanistan, Bangladesh and others.

According to a 2011 PricewaterhouseCoopers report, India’s GDP at purchasing power parity could overtake that of the United States by 2045. During the next four decades, India GDP is expected to grow at an annulised average of 8%, making it potentially the world’s fastest-growing major economy until 2050. The report highlights key growth factors: a young and rapidly growing working-age population; growth in the manufacturing sector because of rising education and engineering skills levels; and sustained growth of the consumer market driven by a rapidly growing middle class. The World Bank cautions that, for India to achieve its economic potential, it must continue to focus on public sector reform, transport infrastructure, agriculture and rural development, removal of labour regulations, education, energy security and public health and nutrition.

According to the Worldwide Cost of living Report 2017 released by the Economist Intelligence Unit(EIU) which was created by comparing more than 400 individual prices across 160 products and services, four of the cheapest cities were in India: Bangladesh (3rd), Mumbai (5th), Chennai (5th) and New Delhi (8th).  

 

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Sectors

India’s telecommunication industry, the world’s fastest-growing, added 227 million subscribers during the period 2010-11, and after the first quarter of 2013, India surpassed Japan to become the third-largest smartphone market in the world after China and the US.

The Indian automotive industry, the world’s second fastest growing, increased domestic sales by 26% during 2009-10, and exports by 36% during 2008-09. India’s capacity to generate electrical power is 250 gigawatts, of which 8% is renewal. At the end of 2011, the Indian IT industry employed 2.8 million professionals, generated revenues close to US$ 100 billion equaling 7.5% of Indian GDP and contributed 26% of India merchandise exports

The pharmaceutical industry in India is among the significant emerging markets for the global pharmaceutical industry. The Indian pharmaceutical markets are expected to reach $48.5 billion by 2020. India’s R & D spending constitutes 60% of the biopharmaceutical industry. India is among the top 12 biotech destinations of the world. The Indian biotech industry grew by 15.1% in 2012-13, increasing its revenues from 204.4 billion INR (Indian rupees) to 235.24 billion INR (3.94 B US$- exchange rate June 2013: 1 US$ approx. 60 INR). However, hardly 2% of Indians pay income taxes.

 

Poverty

Despite economic growth during recent decades, Indian continues to face socio-economic challenges. In 2006, Indian contained the largest number of people living below the World Bank’s international poverty line of US$ 1.25 Per day, the proportion having decreased from 60% in 1981 to 42% in 2005, under its later revised poverty line, it was 21% in 2011. 30.7% of India’s children under the age of five are underweight. According to a Food and Agriculture Organisation report in 2015,15% of the population is undernourished. The Mid-Day Meal Scheme attempts to lower these rates. Since 1991, economic inequality between India’s states has consistently grown: the per-capita net state domestic product of the richest states in 2007 was 3.2 times that of the poorest. Corruption in India is perceived to have increased significantly, with one report estimating the illegal capital flows since independence to be US$462 billion.

India has the most people living in condition of slavery, 18 million, most of who are in bonded labour. India has the largest number of child labourers under the age of 14 in the world with an estimated 12.6 million children engaged in hazardous occupations.  

 

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