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Economy of India

2009-02-28T09:11:00.000-08:00

For an entire generation from the 1950s until the 1980s, India followed socialist-inspired policies. The economy was shackled by extensive regulation, protectionism, and public ownership, leading to pervasive corruption and slow growth. Since 1991, the nation has moved towards a market-based system.

With an average annual GDP growth rate of 5.8% for the past two decades, the economy is among the fastest growing in the world. It has the world's second largest labour force, with 516.3 million people. In terms of output, the agricultural sector accounts for 28% of GDP; the service and industrial sectors make up 54% and 18% respectively. Major agricultural products include rice, wheat, oilseed, cotton, jute, tea, sugarcane, potatoes; cattle, water buffalo, sheep, goats, poultry; fish. Major industries include textiles, chemicals, food processing, steel, transportation equipment, cement, mining, petroleum, machinery, software. India's trade has reached a relatively moderate share 24% of GDP in 2006, up from 6% in 1985. India's share of world trade has reached 1%. Major exports include petroleum products, textile goods, gems and jewelry, engineering goods, chemicals, leather manufactures. Major imports include crude oil, machinery, gems, fertilizer, chemicals.

India's GDP is US$1.089 trillion, which makes it the twelfth-largest economy in the world[101] or fourth largest by purchasing power adjusted exchange rates. India's nominal per capita income US$977 is ranked 128th in the world. In the late 2000s, India's economic growth has averaged 7½% a year, which will double the average income in a decade.

India remains one of the poorest countries in the world. The percentage of people living below the new international poverty line $1.25 a day (PPP, in nominal terms Rs 21.6 a day in urban areas and Rs 14.3 in rural areas in 2005) decreased from 60% in 1981 to 42% in 2005.[102] 85.7% of the population was living on less than $2.50 (PPP) a day in 2005, compared with 80.5% for Sub-Saharan Africa. Even though India has avoided famines in recent decades, half of children are underweight, one of the highest rates in the world and nearly double the rate of Sub-Saharan Africa.

Ongoing reforms are watched closely as India could become potentially important for the global economy. A Goldman Sachs report states that India "will remain a low-income country for several decades, with per capita incomes well below its other BRIC peers. But if it can fulfill its growth potential, it can become a motor for the world economy, and a key contributor to generating spending growth.". Although the Indian economy has grown steadily over the last two decades; its growth has been uneven when comparing different social groups, economic groups, geographic regions, and rural and urban areas. 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.

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