Economy of India


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Economy of India

  1. 1. Economy of India From Wikipedia, the free encyclopedia Economy of The Republic of India Mumbai, financial centre of India.Rank 11th (nominal) / 3rd (PPP)Currency 1 Indian Rupee (INR) ( ) = 100 PaisaFiscal year 1 April – 31 MarchTrade WTO, SAFTA, G-20 and othersorganizationsStatisticsGDP $1.676 trillion (nominal: 11th; 2011)[1] $4.457 trillion (PPP: 3rd; 2011)[1]GDP growth 5.5% (Q1, 2012)[2]GDP per capita $1,389 (nominal: 140th; 2011)[1] $3,694 (PPP: 129th; 2011)[1]GDP by sector Agriculture: 17.2%, industry: 26.4%, services: 56.4% (2011 est.)Inflation (CPI) WPI: 6.87% (July 2012)[3] CPI: 10.02% (June 2012)[4]
  2. 2. Population 29.8% (2010)below poverty (Note: 32.7% live on less than $1.25 a dayline 68.7% live on less than $2 a day)[5]Gini coefficient 36.8 (List of countries)Labour force 487.6 million (2011 est.)Labour force Agriculture: 52%, industry: 14%, services:by occupation 34% (2009 est.)Unemployment 9.8% (2011 est.)[6]Average gross $1,410 yearly (2011)[5]salaryMain industries textiles, chemicals, processing, steel, transportation equipment, cement, mining, petroleum, machinery, software, pharmaceuticalsEase of Doing 132nd[7] (2012)Business RankExternalExports $299.4 billion (2011 est.)Export goods petroleum products, precious stones, machinery, iron and steel, chemicals, vehicles, apparelMain export UAE 13%, US 11.4%, China 6.3%,partners Singapore 5.3% (2011)Imports $461.4 billion (2011 est.)Import goods crude oil, precious stones, machinery, fertilizer, iron and steel, chemicalsMain import China 12.1%, UAE 8.3%, Saudi Arabiapartners 5.8%, US 5.1%, Switzerland 4.7% (2011)FDI stock $36.5 billion (2011–12)Gross external $289.7 billion (31 December 2011 est.)debtPublic finances
  3. 3. Public debt 68.05% of GDP (2011 est.)[8] Budget deficit 5.9% of GDP (2011–12) Revenues $196.4 billion (2011 est.) Expenses $308.8 billion (2011 est.) Economic aid $2.107 billion (2008)[9] Credit rating BBB- (Domestic) BBB- (Foreign) BBB+ (T&C Assessment) Outlook: Stable (Standard & Poors)[10] Foreign reserves $288.92 billion (August 2012)[11] Main data source: CIA World Fact Book All values, unless otherwise stated, are in US dollarsThe economy of India is the eleventh largest in the world by nominal GDP andthe third largest by purchasing power parity (PPP).[1] The country is one of the G-20 major economies and a member of BRICS. On a per capita income basis, Indiaranked 140th by nominal GDP and 129th by GDP (PPP) in 2011, according to theIMF.[12]After the independence-era Indian economy (before and a little after 1947) wasinspired by the Soviet model of economic development, with a large public sector,high import duties combined with interventionist policies, leading to massiveinefficiencies and widespread corruption. However, later on India adopted freemarket principles and liberalized its economy to international trade under theguidance of Manmohan Singh, who then was the Finance Minister of India underthe leadership of P.V. Narasimha Rao the then Prime Minister who eliminatedLicense Raj a pre- and post-British Era mechanism of strict government control onsetting up new industry. Following these strong economic reforms, and a strongfocus on developing national infrastructure such as the GoldenQuadrilateral project by Atal Bihari Vajpayee the then Prime Minister the countryseconomic growth progressed at a rapid pace with very high rates of growth andlarge increases in the incomes of people.[13]
  4. 4. 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 inper capita income in a period from 1947 (Rs 249.6) to 2011. The growth was ledprimarily due to a huge increase in the size of the middle class consumer, a largelabour force, growth in the manufacturing sector due to rising education levels andengineering skills and considerable foreign investments. India is the nineteenthlargest exporter and tenth largest importer in the world. Economic growth ratestood at around 6.5% for the 2011–12 fiscal year.OverviewA combination of protectionist, import-substitution, and Fabian socialist-inspiredpolicies governed India for sometime after the end of British occupation. Theeconomy was then characterized by extensive regulation, protectionism, publicownership, pervasive corruption and slow growth.[14][15] Since 1991, continuingeconomic liberalization has moved the country towards a market-basedeconomy.[14][15] By 2008, India had established itself as one of the worlds fastestgrowing economies. Growth significantly slowed to 6.8% in 2008–09, butsubsequently recovered to 7.4% in 2009–10, while the fiscal deficit rose from 5.9%to a high 6.5% during the same period.[16] India’s current account deficit surged to4.1% of GDP during Q2 FY11 against 3.2% the previous quarter. Theunemployment rate for 2010–11, according to the state Labour Bureau, was 9.8%nationwide.[6] As of 2011, Indias public debt stood at 68.05% of GDP which ishighest among the emerging economies.[8] However, inflation remains stubbornlyhigh with 6.87% in July 2012, the highest among its BRICS counterparts.[3]Indias large service industry accounts for 57.2% of the countrys GDP while theindustrial and agricultural sectors contribute 28.6% and 14.6%respectively.[17] Agriculture is the predominant occupation in Rural India,accounting for about 52% of employment. The service sector makes up a further34% and industrial sector around 14%.[18] However, statistics from a 2009–10government survey, which used a smaller sample size than earlier surveys,suggested that the share of agriculture in employment had dropped to 45.5%.[6]Major industries include telecommunications, textiles, chemicals, food processing,steel, transportation equipment, cement, mining, petroleum, machinery, software
  5. 5. and pharmaceuticals.[19] The labour force totals 500 million workers. Majoragricultural products include rice, wheat, oilseed, cotton, jute, tea, sugarcane,potatoes, cattle, water buffalo, sheep, goats, poultry and fish.[19] In 2010–2011,Indias top five trading partners are United Arab Emirates, China, United States,Saudi Arabia and Germany.Previously a closed economy, Indias trade and business sector has grownfast.[14] India currently accounts for 1.5% of world trade as of 2007 according tothe World Trade Statistics of the WTO in 2006, which valued Indias totalmerchandise trade (counting exports and imports) at $294 billion and Indiasservices trade at $143 billion. Thus, Indias global economic engagement in 2006covering both merchandise and services trade was of the order of $437 billion, upby a record 72% from a level of $253 billion in 2004. Indias total trade in goodsand services has reached a share of 43% of GDP in 2005–06, up from 16% in1990–91.[20] In the year 2010–11 Indias total merchandise trade (counting exportsand imports) stands at $ 606.7 billion [21] and is currently the 9th largest in theworld. During 2011–12, Indias foreign trade grew by an impressive 30.6% toreach $ 792.3 billion (Exports-38.33% & Imports-61.67%).
  6. 6. HistoryPre-colonial period (up to 1773)The citizens of the Indus Valley civilization, a permanent settlement that flourishedbetween 2800 BC and 1800 BC, practiced agriculture, domesticated animals, useduniform weights and measures, made tools and weapons, and traded with othercities. Evidence of well-planned streets, a drainage system and watersupply reveals their knowledge of urban planning, which included the worlds firsturban sanitation systems and the existence of a form of municipal government.[22] The spice trade between India and Europe was the main catalyst for the Age of Discovery.Maritime trade was carried out extensively between South India and southeast andWest Asia from early times until around the fourteenth century AD. Boththe Malabar and Coromandel Coasts were the sites of important trading centersfrom as early as the first century BC, used for import and export as well as transitpoints between the Mediterranean region and southeast Asia.[24] Over time, tradersorganized themselves into associations which received state patronage.Raychaudhuri and Habib claim this state patronage for overseas trade came to anend by the thirteenth century AD, when it was largely taken over by the local Parsi,Jewish and Muslim communities, initially on the Malabar and subsequently on theCoromandel Coast.
  7. 7. Atashgah is a temple built by Indian traders before 1745. The temple is west ofCaspian Sea, between West Asia and Eastern Europe. The inscription shown is inSanskrit (above) and Persian.Other scholars suggest trading from India to West Asia and Eastern Europe wasactive between 14th and 18th century. During this period, Indian traders had settledin Surakhani, a suburb of greater Baku, Azerbaijan. These traders had built aHindu temple, now preserved by the government of Azerbaijan. French JesuitVillotte, who lived in Azerbaijan in late 1600s, wrote this Indian temple wasrevered by Hindus;[29] the temple has numerous carvings in Sanskrit or Punjabi,dated to be between 1500 and 1745 AD. The Atashgah temple built by the Baku-resident traders from India suggests commerce was active and prosperous forIndians by the 17th century.[30][31][32][33]Further north, the Saurashtra and Bengal coasts played an important role inmaritime trade, and the Gangetic plains and the Indus valley housed several centersof river-borne commerce. Most overland trade was carried out via the KhyberPass connecting the Punjab region with Afghanistan and onward to the MiddleEast and Central Asia. Although many kingdoms and rulers issuedcoins, barter was prevalent. Villages paid a portion of their agricultural produce asrevenue to the rulers, while their craftsmen received a part of the crops at harvesttime for their services. Silver coin of theMaurya Empire, 3rd century BC. Silver coin of the Gupta dynasty, 5th century AD.
  8. 8. Sean Harkin estimates China and India may have accounted for 60 to 70 percent ofworld GDP in the 17th century.[36]Assessment of Indias pre-colonial economy is mostly qualitative, owing to thelack of quantitative information. The Mughal economy functioned on an elaboratesystem of coined currency, land revenue and trade. Gold, silver and copper coinswere issued by the royal mints which functioned on the basis of freecoinage.[37] The political stability and uniform revenue policy resulting from acentralized administration under the Mughals, coupled with a well-developedinternal trade network, ensured that India, before the arrival of the British, was to alarge extent economically unified, despite having a traditional agrarian economycharacterized by a predominance of subsistence agriculture dependent on primitivetechnology.[38] After the decline of the Mughals, western, central and parts of southand north India were integrated and administered by the Maratha Empire. After theloss at the Third Battle of Panipat, the Maratha Empire disintegrated into severalconfederate states, and the resulting political instability and armed conflict severelyaffected economic life in several parts of the country, although this wascompensated for to some extent by localized prosperity in the new provincialkingdoms.[39] By the end of the eighteenth century, the British East IndiaCompany entered the Indian political theatre and established its dominance overother European powers. This marked a determinative shift in Indias trade, and aless powerful impact on the rest of the economy.[40]Colonial period (1773–1947)An aerial view of Calcutta Port taken in 1945. Calcutta, which was the economic hub of British India, saw increased industrial activity during World War II.
  9. 9. There is no doubt that our grievances against the British Empire had a sound basis.As the painstaking statistical work of the Cambridge historian Angus Maddisonhas shown, Indias share of world income collapsed from 22.6% in 1700, almostequal to Europes share of 23.3% at that time, to as low as 3.8% in 1952. Indeed, atthe beginning of the 20th century, "the brightest jewel in the British Crown" wasthe poorest country in the world in terms of per capita income.— Manmohan Singh[41]Company rule in India brought a major change in the taxation and agriculturalpolicies, which tended to promote commercialization of agriculture with a focus ontrade, resulting in decreased production of food crops, mass impoverishment anddestitution of farmers, and in the short term, led to numerous famines. [42] Theeconomic policies of the British Raj caused a severe decline inthe handicrafts and handloom sectors, due to reduced demand and dippingemployment.[43] After the removal of international restrictions by the Charter of1813, Indian trade expanded substantially and over the long term showed anupward trend.[44] The result was a significant transfer of capital from India toEngland, which, due to the colonial policies of the British, led to a massive drain ofrevenue rather than any systematic effort at modernization of the domesticeconomy.[45] Estimates of the per capita income of India (1857–1900) as per 1948–49 prices.Indias colonization by the British created an institutional environment that, onpaper, guaranteed property rights among the colonizers, encouraged free trade, andcreated a single currency with fixed exchange rates, standardized weights andmeasures and capital markets. It also established a well-developed systemof railways and telegraphs, a civil service that aimed to be free from politicalinterference, a common-law and an adversarial legal system.[47] This coincidedwith major changes in the world economy – industrialization, and significant
  10. 10. growth in production and trade. However, at the end of colonial rule, Indiainherited an economy that was one of the poorest in the developing world, [48] withindustrial development stalled, agriculture unable to feed a rapidly growingpopulation, a largely illiterate and unskilled labour force, and extremely inadequateinfrastructure.[49]The 1872 census revealed that 91.3% of the population of the region constitutingpresent-day India resided in villages, and urbanization generally remained sluggishuntil the 1920s, due to the lack of industrialization and absence of adequatetransportation. Subsequently, the policy of discriminating protection (where certainimportant industries were given financial protection by the state), coupled with theSecond World War, saw the development and dispersal of industries, encouragingrural-urban migration, and in particular the large port citiesof Bombay, Calcutta and Madras grew rapidly. Despite this, only one-sixth ofIndias population lived in cities by 1951.[51]The impact of British occupation on Indias economy is a controversial topic.Leaders of the Indian independence movement and left-wing people who opposedIndias independence movement economic historians have blamed colonialoccupation for the dismal state of Indias economy in its aftermath and argued thatfinancial strength required for industrial development in Europe was derived fromthe wealth taken from colonies in Asia and Africa. At the same time, right-winghistorians have countered that Indias low economic performance was due tovarious sectors being in a state of growth and decline due to changes brought in bycolonialism and a world that was moving towards industrialization and economicintegration.[52]Pre-liberalization period (1947–1991)Indian economic policy after independence was influenced by the colonialexperience, which was seen by Indian leaders as exploitative, and by those leadersexposure to British social democracy as well as the progress achieved by theplanned economy of the Soviet Union.[49] Domestic policy tended towardsprotectionism, with a strong emphasis on import substitutionindustrialization, economic interventionism, a large public sector, businessregulation, and central planning,[53] while trade and foreign investment policieswere relatively liberal.[54] Five-Year Plans of India resembled central planning in
  11. 11. the Soviet Union. Steel, mining, machine tools, telecommunications, insurance,and power plants, among other industries, were effectively nationalized in the mid-1950s.[55] “ Never talk to me about profit, Jeh, it is a dirty word. ” —Nehru, Indias Fabian Socialism inspired first prime minister to industrialist J.R.D. Tata, when Tata suggested state- owned companies should be profitable, [56]Jawaharlal Nehru, the first prime minister of India, along with thestatistician Prasanta Chandra Mahalanobis, formulated and oversaw economicpolicy during the initial years of the countrys existence. They expected favorableoutcomes from their strategy, involving the rapid development of heavyindustry by both public and private sectors, and based on direct and indirect stateintervention, rather than the more extreme Soviet-style central commandsystem.[57][58] The policy of concentrating simultaneously on capital- andtechnology-intensive heavy industry and subsidizing manual, low-skill cottageindustries was criticized by economist Milton Friedman, who thought it wouldwaste capital and labour, and retard the development of smallmanufacturers.[59] 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 unfavorable comparison with growth rates inother Asian countries.[60][61] “ (In the current Indian regulatory system,) I cannot decide how much to borrow, what shares to issue, at what price, what wages and bonus to pay, ”
  12. 12. and what dividend to give. I even need the governments permission for the salary I pay to a senior executive. —J. R. D. Tata in 1969, [56]Since 1965, the use of high-yielding varieties of seeds, increased fertilizers andimproved irrigation facilities collectively contributed to the Green Revolution inIndia, which improved the condition of agriculture by increasing crop productivity,improving crop patterns and strengthening forward and backward linkages betweenagriculture and industry.[62] However, it has also been criticized as an unsustainableeffort, resulting in the growth of capitalistic farming, ignoring institutional reformsand widening income disparities.[63]Subsequently the Emergency and Garibi Hatao concept, by which the income taxlevels at one point raised to a maximum of 97.5%, a record in the world for non-communist economies, started diluting the earlier efforts.Post-liberalization period (since 1991)Main articles: Economic liberalization in India and Economic development inIndia GDP of India has risen rapidly since 1991.In the late 1970s, the government led by Morarji Desai eased restrictions oncapacity expansion for incumbent companies, removed price controls, reduced
  13. 13. corporate taxes and promoted the creation of small scale industries in largenumbers. However, the subsequent government policy of Fabian socialismhampered the benefits of the economy, leading to high fiscal deficits and aworsening current account. The collapse of the Soviet Union, which was Indiasmajor trading partner, and the Gulf War, which caused a spike in oil prices,resulted in a major balance-of-payments crisis for India, which found itself facingthe prospect of defaulting on its loans.[64] India asked for a $1.8 billion bailout loanfrom the International Monetary Fund (IMF), which in return demandedreforms.[65]In response, Prime Minister Narasimha Rao, along with his finance ministerManmohan Singh, initiated the economic liberalization of 1991. The reforms didaway with the Licence Raj, reduced tariffs and interest rates and ended manypublic monopolies, allowing automatic approval of foreign direct investment inmany sectors.[66] Since then, the overall thrust of liberalization has remained thesame, although no government has tried to take on powerful lobbies such as tradeunions and farmers, on contentious issues such as reforming labour laws andreducing agricultural subsidies.[67] By the turn of the 20th century, India hadprogressed towards a free-market economy, with a substantial reduction in statecontrol of the economy and increased financial liberalization.[68] This has beenaccompanied by increases in life expectancy, literacy rates and food security,although urban residents have benefited more than agricultural residents.[69]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 Moodys. [70] In2003, Goldman Sachs predicted that Indias GDP in current prices would overtakeFrance and Italy by 2020, Germany, UK and Russia by 2025 and Japan by 2035,making it the third largest economy of the world, behind the US and China. India isoften seen by most economists as a rising economic superpower and is believed toplay a major role in the global economy in the 21st century.[71][72]
  14. 14. SectorsIndustry and services India has one of the worlds fastest growing automobile industries.[73] Shown here is the Tata Nano, the worlds cheapest car.Industry accounts for 28% of the GDP and employ 14% of the totalworkforce.[18] In absolute terms, India is 12th in the world in terms of nominalfactory output.[75] The Indian industrial sector underwent significant changes as aresult of the economic reforms of 1991, which removed import restrictions,brought in foreign competition, led to privatization of certain public sectorindustries, liberalized the FDI regime, improved infrastructure and led to anexpansion in the production of fast moving consumer goods.[76] Post-liberalization,the Indian private sector was faced with increasing domestic as well as foreigncompetition, including the threat of cheaper Chinese imports. It has since handledthe change by squeezing costs, revamping management, and relying on cheaplabour and new technology. However, this has also reduced employmentgeneration even by smaller manufacturers who earlier relied on relatively labour-intensive processes.[77]TextileTextile manufacturing is the second largest source of employment after agricultureand accounts for 20% of manufacturing output, providing employment to over 20million people.[78] As stated in late January, by the then Minister of Textiles, India,Shri Shankersinh Vaghela, the transformation of the textile industry from a
  15. 15. degrading to rapidly developing industry, has become the biggest achievement ofthe central government. After freeing the industry in 2004–2005 from a number oflimitations, primarily financial, the government gave the green light to the flow ofmassive investment – both domestic and foreign. During the period from 2004 to2008, total investment amounted to 27 billion dollars. By 2012, still convinced ofthe government, this figure will reach 38 billion as expected; these investments in2012 will create an additional sector of more than 17 million jobs. But demand forIndian textiles in world markets continues to fall. According to Union Minister forCommerce and Industries Kamal Nath, only during 2008–2009 fiscal year (whichends 31 March) textile and clothing industry will be forced to cut about 800thousand new jobs – nearly half of the rate of two million, which will have to goall the export-oriented sectors of Indian economy to soften the impact of the globalcrisis.[citation needed] Ludhiana produces 90% of woolens 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. Considering the15,000 Cr sale of the textile products and nominal 20% net profit and 257,572Population of the city, per capita income of Ichalkaranji is 1,16,472, amongst thecities having highest per capita income in the country. Textile DevelopmentCluster : To enhance and improve the infrastructure facilities of the city, MunicipalCouncil along with Ichalkaranji Co-operative Industrial Estate, Laxmi Co-operative Industrial Estate, Parvati Industrial Estate and DKTE Textile andEngineering Institute have jointly come together and formed a Special PurposeVehicle (SPV) company viz. ―Ichalkaranji Textile Development Cluster Limited(ITDC).The individual members will contribute to the extent of about 50% of theproject cost and the balance amount would come in from the grant in aid fromDepartment of Industrial Promotion and Policy, Government of India, under theIndustrial Infrastructure up-gradation Scheme (IIUS).[79]ServicesIndia is 13th in services output. The services sector provides employment to 23%of the work force and is growing quickly, with a growth rate of 7.5% in 1991–2000, up from 4.5% in 1951–80. It has the largest share in the GDP, accounting for55% in 2007, up from 15% in 1950.[18] Information technology and businessprocess outsourcing are among the fastest growing sectors, having a cumulativegrowth rate of revenue 33.6% between 1997–98 and 2002–03 and contributing to
  16. 16. 25% of the countrys total exports in 2007–08.[80] The growth in the IT sector isattributed to increased specialization, and an availability of a large pool of lowcost, highly skilled, educated and fluent English-speaking workers, on the supplyside, matched on the demand side by increased demand from foreign consumersinterested in Indias service exports, or those looking to outsource their operations.The share of the Indian IT industry in the countrys GDP increased from 4.8 % in2005–06 to 7% in 2008.[81] In 2009, seven Indian firms were listed among the top15 technology outsourcing companies in the world.[82]RetailRetail industry is one of the pillars of Indian economy and accounts for 14–15% ofits GDP.[83][84] The Indian retail market is estimated to be US$ 450 billion and oneof the top five retail markets in the world by economic value. India is one of thefastest growing retail markets in the world, with 1.2 billion people.[85][86]Indias retailing industry essentially consists of the local mom and pop store, ownermanned general stores, convenience stores, hand cart and pavement vendors,etc.[87] Organized retail supermarkets account for 4% of the market as of2008.[88] Regulations prevent most foreign investment in retailing. Moreover, overthirty regulations such as "signboard licences" and "anti-hoarding measures" mayhave to be complied before a store can open doors. There are taxes for movinggoods from state to state, and even within states.[88]TourismTourism in India is relatively undeveloped, but a high growth sector. It contributes6.23% to the national GDP and 8.78% of the total employment. The majority offoreign tourists come from USA and UK.[89] Indias rich history and its cultural andgeographical diversity make its international tourism appeal large and diverse. Itpresents heritage and cultural tourism along with medical, business and sportstourism. India has one of the largest and fastest growing medical tourismsectors.[90]
  17. 17. MiningMining forms an important segment of the Indian economy, with the countryproducing 79 different minerals (excluding fuel and atomic resources) in 2009–10,including ironore, manganese, mica, bauxite, chromite, limestone, asbestos, fluorite, gypsum, ochre,phosphorite and silica sand.[91]AgricultureIndia ranks second worldwide in farm output. Agriculture and allied sectorslike forestry, logging and fishing accounted for 15.7% of the GDP in 2009–10,employed 52.1% of the total workforce, and despite a steady decline of its share inthe GDP, is still the largest economic sector and a significant piece of the overallsocio-economic development of India.[92] Yields 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.[93] Indian states Uttar Pradesh, Punjab, Haryana, MadhyaPradesh, Andhra Pradesh, Bihar, West Bengal, Gujarat and Maharashtra are keyagricultural contributing states of India.India receives an average annual rainfall of 1,208 millimeters (47.6 in) and a totalannual precipitation of 4000 billion cubic meters, with the total utilizable waterresources, including surface and groundwater, amounting to 1123 billion cubicmeters.[94] 546,820 square kilometers (211,130 sq mi) of the land area, or about39% of the total cultivated area, is irrigated.[95] Indias inland water resourcesincluding rivers, canals, ponds and lakes and marine resources comprising the eastand west coasts of the Indian ocean and other gulfs and bays provide employmentto nearly six million people in the fisheries sector. In 2008, India had the worldsthird largest fishing industry.[96]India is the largest producer in the world of milk, jute and pulses, and also has theworlds second largest cattle population with 175 million animals in 2008. [97] It isthe second largest producer of rice, wheat, sugarcane, cotton and groundnuts, aswell as the second largest fruit and vegetable producer, accounting for 10.9% and
  18. 18. 8.6% of the world fruit and vegetable production respectively. [97] India is also thesecond largest producer and the largest consumer of silk in the world, producing77,000 million tons in 2005.[98]Banking and financeThe Indian money market is classified into the organized sector, comprisingprivate, public and foreign owned commercial banks and cooperative banks,together known as scheduled banks, and the unorganized sector, which includesindividual or family owned indigenous bankers or money lenders and non-bankingfinancial companies.[99] The unorganized sector and microcredit are still preferredover traditional banks in rural and sub-urban areas, especially for non-productivepurposes, like ceremonies and short duration loans.[100]Prime Minister Indira Gandhi nationalized 14 banks in 1969, followed by sixothers in 1980, and made it mandatory for banks to provide 40% of their net creditto 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 in 1969to 72,170 in 2007 and the population covered by a branch decreased from 63,800to 15,000 during the same period. The total bank deposits increased from5,910 crore (US$1.07 billion) in 1970–71 to 3,830,922 crore (US$693.4billion) in 2008–09. Despite an increase of rural branches, from 1,860 or 22% ofthe total number of branches in 1969 to 30,590 or 42% in 2007, only 32,270 out of500,000 villages are covered by a scheduled bank.[101][102]Indias gross domestic saving in 2006–07 as a percentage of GDP stood at a high32.7%.[103] More than half of personal savings are invested in physical assets suchas land, houses, cattle, and gold.[104] the public sector banks hold over 75% of totalassets of the banking industry, with the private and foreign banks holding 18.2%and 6.5% respectively.[105] since liberalization, the government has approvedsignificant banking reforms. While some of these relate to nationalized banks, likeencouraging mergers, reducing government interference and increasingprofitability and competitiveness, other reforms have opened up the banking andinsurance sectors to private and foreign players.[18][106]
  19. 19. Energy and powerAs of 2010, India imported about 70% of its crude oil requirements.[107] Shownhere is an ONGC platform at Mumbai High in the Arabian Sea, one of the few sitesof domestic production.As of 2009, India is the fourth largest producer of electricity and oil products andthe fourth largest importer of coal and crude-oil in the world.[108] Coal and oiltogether account for 66 % of the energy consumption of India.[109]Indias oil reserves meet 25% of the countrys domestic oil demand.[18][110] As of2009, Indias total proven oil reserves stood at 775 million metric tones while gasreserves stood at 1074 billion cubic meters.[111] Oil and natural gas fields arelocated offshore at Mumbai High, Krishna Godavari Basin and the Cauvery Delta,and onshore mainly in the states of Assam, Gujarat and Rajasthan.[111] India is thefourth largest consumer of oil in the world and imported $82.1 billion worth of oilin the first three quarters of 2010, which had an adverse effect on its currentaccount deficit.[107] The petroleum industry in India mostly consists of public sectorcompanies such as Oil and Natural Gas Corporation (ONGC),Hindustan PetroleumCorporation Limited (HPCL) and Indian Oil Corporation Limited (IOCL). Thereare some major private Indian companies in the oil sector such as RelianceIndustries Limited (RIL) which operates the worlds largest oil refiningcomplex.[112]As of December 2011, India had an installed power generation capacity of 185.5Giga Watts(GW), of which thermal power contributed65.87%, hydroelectricity 20.75%, other sources of renewable energy 10.80%,and nuclear power 2.56%.[113] India meets most of its domestic energy demandthrough its 106 billion tones of coal reserves.[114] India is also rich in certainrenewable sources of energy with significant future potential such
  20. 20. as solar, wind and biofuels (jatropha, sugarcane). Indias huge thorium reserves –about 25% of worlds reserves – are expected to fuel the countrysambitious nuclear energy program in the long-run. Indias dwindling uraniumreserves stagnated the growth of nuclear energy in the country for manyyears.[115] However, the Indo-US nuclear deal has paved the way for India toimport uranium from other countries.[116]InfrastructureIndia has the worlds third largest road network,[117] covering more than 4.3 millionkilometers and carrying 60% of freight and 87% of passenger traffic.[118] IndianRailways is the fourth largest rail network in the world, with a track length of114,500 kilometers. India has 13 major ports, handling a cargo volume of 850million tons in 2010.[119]India has a national teledensity rate of 74.15% with 926.53 million telephonesubscribers, two-thirds of them in urban areas,[120] but Internet use is rare, witharound 13.3 million broadband lines in India in December 2011.[121] However, thisis growing and is expected to boom following the expansionof 3G and WiMAX services.[122]External trade and investmentGlobal trade relations A map showing the global distribution of Indian exports in 2006 as a percentage of the top market (USA – $20,902,500,000).
  21. 21. Until the liberalization of 1991, India was largely and intentionally isolated fromthe world markets, to protect its economy and to 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 FDI inthe 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-residentIndians.[123] Indias exports were stagnant for the first 15 years after independence,due to general neglect of trade policy by the government of that period. Imports inthe same period, due to industrialization being nascent, consisted predominantly ofmachinery, raw materials and consumer goods.[124] Graphical depiction of Indias product exports in 28 color coded categories.Since liberalization, the value of Indias international trade has increasedsharply,[125] with the contribution of total trade in goods and services to the GDPrising from 16% in 1990–91 to 47% in 2008–10.[20][126] India accounts for 1.44% ofexports and 2.12% of imports for merchandise trade and 3.34% of exports and3.31% of imports for commercial services trade worldwide. [126]Indias majortrading partners are the European Union, China, the United States of America andthe United Arab Emirates.[127] In 2006–07, major export commodities includedengineering goods, petroleum products, chemicals and pharmaceuticals, gems andjewellery, textiles and garments, agricultural products, iron ore and other minerals.Major import commodities included crude oil and related products, machinery,electronic goods, gold and silver.[128] In November 2010, exports increased 22.3%year-on-year to 85,063 crore (US$15.4 billion), while imports were up 7.5% at
  22. 22. 125,133 crore (US$22.65 billion). Trade deficit for the same month droppedfrom 46,865 crore (US$8.48 billion) in 2009 to 40,070 crore (US$7.25 [129]billion) in 2010.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 of the developingworld. For instance, India has continued its opposition to the inclusion of suchmatters as labour and environment issues and other non-tariff barriers to trade intothe WTO policies.[130]Balance of payments Cumulative Current Account Balance 1980–2008 based on IMF dataSince independence, Indias balance of payments on its current account has beennegative. Since economic liberalization in the 1990s, precipitated by a balance ofpayment crisis, Indias exports rose consistently, covering 80.3% of its imports in2002–03, up from 66.2% in 1990–91.[131] However, the global economic slumpfollowed by a general deceleration in world trade saw the exports as a percentageof imports drop to 61.4% in 2008–09.[132]Indias growing oil import bill is seen asthe main driver behind the large current account deficit,[107] which rose to$118.7 billion, or 9.7% of GDP, in 2008–09.[133] Between January and October2010, India imported $82.1 billion worth of crude oil.[107]Due to the global late-2000s recession, both Indian exports and imports declinedby 29.2% and 39.2% respectively in June 2009.[134] The steep decline was becausecountries hit hardest by the global recession, such as United States and members ofthe European Union, account for more than 60% of Indian exports.[135] However,since the decline in imports was much sharper compared to the decline in exports,Indias trade deficit reduced to 25,250 crore (US$4.57 billion).[134] As of June
  23. 23. 2011, exports and imports have both registered impressive growth with monthlyexports reaching $25.9 billion for the month of May 2011 and monthly importsreaching $40.9 billion for the same month. This represents a year on year growthof 56.9% for exports and 54.1% for imports.[21]Indias reliance on external assistance and concessional debt has decreased sinceliberalization of the economy, and the debt service ratio decreased from 35.3% in1990–91 to 4.4% in 2008–09.[136] In India, External CommercialBorrowings (ECBs), or commercial loans from non-resident lenders, are beingpermitted by the Government for providing an additional source of funds to Indiancorporate. The Ministry of Finance monitors and regulates them through ECBpolicy guidelines issued by the Reserve Bank of India under the Foreign ExchangeManagement Act of 1999.[137] Indias foreign exchange reserves have steadily risenfrom $5.8 billion in March 1991 to $283.5 billion in December 2009. [138] Foreign direct investment Share of top five investing countries in FDI inflows. (2000–2010)[139] Inflows Rank Country Inflows (%) (million USD) 1 Mauritius 50,164 42.00 2 Singapore 11,275 9.00 3 USA 8,914 7.00 4 UK 6,158 5.00 5 Netherlands 4,968 4.00
  24. 24. As the third-largest economy in the world in PPP terms, India is a preferreddestination for FDI;[140] During the year 2011, FDI inflow into India stood at $ 36.5billion, 51.1% higher than 2010 figure of $ 24.15 billion. India has strengths intelecommunication, information technology and other significant areas such asauto components, chemicals, apparels, pharmaceuticals, and jewellery. Despite asurge in foreign investments, rigid FDI policies were a significant hindrance.However, due to positive economic reforms aimed at deregulating the economyand stimulating foreign investment, India has positioned itself as one of the front-runners of the rapidly growing Asia-Pacific region.[140] India has a large pool ofskilled managerial and technical expertise. The size of the middle-class populationstands at 300 million and represents a growing consumer market.[141]During 2000–10, the country attracted $178 billion as FDI.[142] The inordinatelyhigh investment from Mauritius is due to routing of international funds through thecountry given significant tax advantages; double taxation is avoided due to a taxtreaty between India and Mauritius, and Mauritius is a capital gains tax haven,effectively creating a zero-taxation FDI channel.[143]Indias recently liberalized FDI policy (2005) allows 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 andliberalized FDI regime. In March 2005, the government amended the rules to allow100% 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.[144] Despite a number of changes in the FDI policy to removecaps in most sectors, there still remains an unfinished agenda of permitting greaterFDI in politically sensitive areas such as insurance and retailing. The total FDIequity inflow into India in 2008–09 stood at 122,919 crore (US$22.25 billion), agrowth of 25% in rupee terms over the previous period.[145].Indias trade andbusiness sector has grown fast.[13] India currently accounts for 1.5% of worldtrade as of 2007 according to the World Trade Statistics of the WTO in 2006
  25. 25. Currency The RBIs new headquarters in MumbaiThe Indian rupee is the only legal tender in India, and is also accepted as legaltender in the neighboring Nepal and Bhutan, both of which peg their currency tothat of the Indian rupee. The rupee is divided into 100 paisa. The highest-denomination banknote is the 1,000 rupee note; the lowest-denomination coin incirculation is the 50 paisa coin.[146] However, with effect from 30 June 2011, 50paisa is the minimum coin accepted in the markets as all denominations belowhave ceased to be legal currency.[147][148]Indias monetary system is managed by theReserve Bank of India (RBI), the countrys central bank.[149]Established on 1 April1935 and nationalized in 1949, the RBI serves as the nations monetary authority,regulator and supervisor of the monetary system, banker to the government,custodian of foreign exchange reserves, and as an issuer of currency. It is governedby a central board of directors, headed by a governor who is appointed by theGovernment of India.[150]The rupee was linked to the British pound from 1927–1946 and then the U.S.dollar till 1975 through a fixed exchange rate. It was devalued in September 1975and the system of fixed par rate was replaced with a basket of four majorinternational currencies – the British pound, the U.S. dollar, the Japanese yen andthe Deutsche mark.[151] from 2003 to 2008, the rupee appreciated against the U.S.dollar; thereafter, it has sharply depreciated. Between 2010 and 2012, the rupeevalue had depreciated by about 30% of its value to the U.S. dollar in 2010.[152]
  26. 26. Income and consumption World map showing the Gini coefficient, a measure of income inequality. India has a Gini coefficient of 0.368.Indias gross national income per capita had experienced high growth rates since2002. Indias Per Capita Income has tripled from Rs.19,040 in 2002–03 toRs.53,331 in 2010–11, averaging 13.7% growth over these eight years.[153] As of2010, according to World Bank statistics, about 400 million people in India, ascompared to 1.29 billion people worldwide, live on less than $1.25 (PPP) per day.These consumption levels are on an individual basis, not household.[154]Per 2011 census, India has about 330 million houses and 247 million households.The household size in India has dropped in recent years, with 2011 censusreporting 50% of households have 4 or fewer members. Some households have 6or more members, including the grandparents. These households produced a GDPof about $1.7 Trillion.[158] The household consumption patterns per 2011 census:about 67 percent of households use firewood, crop residue or cow dung cakes forcooking purposes; 53 percent do not have sanitation or drainage facilities onpremises; 83 percent have water supply within their premises or 100 meters fromtheir house in urban areas and 500 meters from the house in rural areas; 67 percentof the households have access to electricity; 63 percent of households havelandline or mobile telephone connection; 43 percent have a television; 26 percenthave either a two wheel (motorcycle) or four wheel (car) vehicle. Compared to2001, these income and consumption trends represent moderate to significantimprovements.[155][156] One report in 2010 claimed that the number of high incomehouseholds has crossed lower income households.
  27. 27. GNI per capita: India (1,170 $) Higher GNI per capita compared to India Lower GNI per capita compared to IndiaIndia has about 61 million children under the age of 5 who are chronicallymalnourished, compared to 150 million children worldwide. Majority ofmalnourished children of India live in rural areas. Girls tend to be moremalnourished than boys. Malnourishment, claims this report, is not a matter ofincome, rather it is education as in other parts of the world. A third of childrenfrom the wealthiest fifth of India’s population are malnourished. This is because ofpoor feeding practices — foremost among them a failure exclusively to breastfeedin the first six months — plays as big a role in India’s malnutrition rates as foodshortages. Indias government has launched several major programs with mandatedsocial spending programs to address child malnourishment problem. However,Indian government has largely failed. A public distribution system that targetssubsidized food to the poor and a vast midday-meal scheme, to which 120 millionchildren subscribe —are hampered by inefficiency and corruption. Anothergovernment-paid program named Integrated Childhood Development Service(ICDS) has been operating since 1975 and it too has been ineffective and awasteful program.[160] A 2011 UNICEF report claims recent encouraging signs.Between 1990 & 2010, India has achieved a 45 percent reduction in under age 5mortality rates, and now ranks 46 in 188 countries on this metric.[161]PovertyAccording to World Bank international poverty line methodology, Indias povertydropped from 42% of its total population in 2005 to about 33% in 2010. [5] In ruralIndia, about 34 percent of the population lives on less than $1.25 a day, down from44 percent in 2005; while in urban India, 29 percent of the population lived below
  28. 28. that absolute poverty line in 2010, down from 36 percent in 2005, according to theWorld Bank report.[162]Since the early 1950s, successive governments have implemented various schemesto alleviate poverty, under central planning, that have met with partial success. Allthese programmes have relied upon the strategies of the Food for work programmeand National Rural Employment Programme of the 1980s, which attempted to usethe unemployed to generate productive assets and build rural infrastructure. [163] In2005, Indian government enacted the Mahatma Gandhi National RuralEmployment Guarantee Act, guaranteeing 100 days of minimum wageemployment to every rural household in all the districts of India.[164] The questionof whether these government spending programs or whether economic reformsreduce poverty, by improving income of the poorest, remains in controversy. [165] In2011, the Mahatma Gandhi National Rural Employment Guarantee programmewas widely criticized as no more effective than other poverty reduction programsin India. Despite its best intentions, MGNREGA is beset with controversy aboutcorrupt officials, deficit financing as the source of funds, poor quality ofinfrastructure built under this program, and unintended destructive effect onpoverty.[166][167][168]EmploymentIndia’s labor regulations – among the most restrictive and complex in the world –have constrained the growth of the formal manufacturing sector where these lawshave their widest application. Better designed labor regulations can attract morelabor- intensive investment and create jobs for India’s unemployed millions andthose trapped in poor quality jobs. Given the country’s momentum of growth, thewindow of opportunity must not be lost for improving the job prospects for the 80million new entrants who are expected to join the work force over the next decade.— World Bank: India Country Overview 2008.[169]Agricultural and allied sectors accounted for about 52.1% of the total workforce in2009–10.[92] While agriculture has faced stagnation in growth, services have seen asteady growth. Of the total workforce, 7% is in the organized sector, two-thirds ofwhich are in the public sector.[170] The NSSO survey estimated that in 2004–05,
  29. 29. 8.3% of the population was unemployed, an increase of 2.2% over 1993 levels,with unemployment uniformly higher in urban areas and amongwomen.[171][172] Growth of labour stagnated at around 2% for the decade between1994–2005, about the same as that for the preceding decade.[164] Avenues foremployment generation have been identified in the IT and travel and tourismsectors, which have been experiencing high annual growth rates of above 9%.[173]Unemployment in India is characterized 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 into urbanareas in search of livelihoods) attempt to solve the problem, by providing financialassistance for setting up businesses, skill honing, setting up public sectorenterprises, reservations in governments, etc. The decline in organizedemployment due to the decreased role of the public sector after liberalization hasfurther underlined the need for focusing on better education and has also putpolitical pressure on further reforms.[174][175] Indias labour regulations are heavyeven by developing country standards and analysts have urged the government toabolish or modify them in order to make the environment more conducive foremployment generation.[176][177] The 11th five-year plan has also identified the needfor a congenial environment to be created for employment generation, by reducingthe number of permissions and other bureaucratic clearances required.[178] Further,inequalities and inadequacies in the education system have been identified as anobstacle preventing the benefits of increased employment opportunities fromreaching all sectors of society.[179]Child labour in India is a complex problem that is basically rooted in poverty,coupled with a failure of governmental policy, which has focused on subsidizinghigher rather than elementary education, as a result benefiting the privileged ratherthan the poorer sections of society.[180] The Indian government is implementing theworlds largest child labour elimination program, with primary education targetedfor ~250 million. Numerous non-governmental and voluntary organizations arealso involved. Special investigation cells have been set up in states to enforceexisting laws banning the employment of children under 14 in hazardousindustries. The allocation of the Government of India for the eradication of childlabour was $21 million in 2007.[181] Public campaigns, provision of meals inschool and other incentives have proven successful in increasing attendance ratesin schools in some states.[182]
  30. 30. In 2009–10, remittances from Indian migrants overseas stood at250,000 crore (US$45.25 billion), the highest in the world, but their share in FDIremained low at around 1%.[183] India ranked 133rd on the Ease of Doing BusinessIndex 2010, behind countries such as China (89th), Pakistan (85th), and Nigeria(125th).[184]Women in India are mainly employed in agriculture and caring for livestock withonly about 20% of the employed women engaging in activities outside agriculture.When employed, women earn substantially less than men, only about 66% of themale incomes in agriculture and 57% of the male incomes outside agriculture.[185]Economic trends and issues Commercial office buildings in Gurgaon.In the revised 2007 figures, based on increased and sustaining growth, moreinflows into foreign direct investment, Goldman Sachs predicts that "from 2007 to2020, India’s GDP per capita in US$ terms will quadruple", and that the Indianeconomy will surpass the United States (in US$) by 2043.[186] In spite of the highgrowth rate, the report stated that India would continue to remain a low-incomecountry for decades to come but could be a "motor for the world economy" if itfulfills its growth potential.[186]According to the official estimates, Indian economy is expected to grow at 7.6%(+/- 0.25%) in the fiscal year 2012–2013.[187] However, leading financialorganizations and economic think-tanks expect Indian economy to grow slowerthan official projections.
  31. 31. Indian economic growth outlook April, 2012 – March, 2013 Estimated GDP growth Month ofOrganization rate projectionInternational Monetary Fund[187] 6.1% July 2012World Bank[188] 6.9% June 2012Asian Development Bank[187] 6.5% July 2012Nomura[189] 5.8% June 2012Morgan Stanley[190] 5.8% June 2012JP Morgan[191] 6-6.5% June 2012Goldman Sachs[192] 6.6% May 2012Bank of America- Merrill Lynch[192] 6.5% May 2012HSBC[193] 6.2% June 2012Standard Chartered[194] 6.2% June 2012Centre for Monitoring Indian 7.2% July 2012Economy[195]
  32. 32. AgricultureSlow agricultural growth is a concern for policymakers as some two-thirds ofIndia’s people depend on rural employment for a living. Current agriculturalpractices are neither economically nor environmentally sustainable and Indiasyields for many agricultural commodities are low. Poorly maintained irrigationsystems and almost universal lack of good extension services are among the factorsresponsible. Farmers access to markets is hampered by poor roads, rudimentarymarket infrastructure, and excessive regulation.— World Bank: "India Country Overview 2008"[169]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.[196] the low productivity in India is a result of several factors.According to the World Bank, Indias large agricultural subsidies are hamperingproductivity-enhancing investment. While overregulation of agriculture hasincreased costs, price risks and uncertainty, governmental intervention in labour,land, and credit markets are hurting the market. Infrastructure such as rural roads,electricity, ports, food storage, retail markets and services areinadequate.[197] further, the average size of land holdings is very small, with 70% ofholdings being less than one hectare in size.[198] The partial failure of land reformsin many states, exacerbated by poorly maintained or non-existent land records, hasresulted in sharecropping with cultivators lacking ownership rights, andconsequently low productivity of labour.[199]Adoption of modern agriculturalpractices and use of technology is inadequate, hampered by ignorance of suchpractices, high costs, illiteracy, slow progress in implementing land reforms,inadequate or inefficient finance and marketing services for farm produce andimpracticality in the case of small land holdings. The allocation of water isinefficient, unsustainable and inequitable. The irrigation infrastructure isdeteriorating.[197] Irrigation facilities are inadequate, as revealed by the fact thatonly 39% of the total cultivable land was irrigated as of 2010,[95] resulting infarmers still being dependent on rainfall, specifically the monsoon season, which isoften inconsistent and unevenly distributed across the country.[200]
  33. 33. Corruption Overview of the index of perception of corruption, 2010Corruption has been one of the pervasive problems affecting India. A 2005 studyby Transparency International (TI) found that more than half of those surveyed hadfirsthand experience of paying bribe or peddling influence to get a job done in apublic office in the previous year.[201] A follow-on 2008 TI study found this rate tobe 40 percent.[202] In 2011, Transparency International ranked India at 95th placeamongst 183 countries in perceived levels of public sector corruption.[203]In 1996, red tape, bureaucracy and the Licence Raj were suggested as a cause forthe institutionalized corruption and inefficiency.[204] More recent [205][206][207]reports suggest the causes of corruption in India include excessiveregulations and approval requirements, mandated spending programs, monopoly ofcertain goods and service providers by government controlled institutions,bureaucracy with discretionary powers, and lack of transparent laws and processes.The Right to Information Act (2005) which requires government officials tofurnish information requested by citizens or face punitive action, computerizationof services, and various central and state government acts that established vigilancecommissions, have considerably reduced corruption and opened up avenues toredress grievances.[201]
  34. 34. The number of people employed in non-agricultural occupations in the public andprivate sectors. Totals are rounded. Private sector data relates to non-agricultureestablishments with 10 or more employees.[163]The current government has concluded that most spending fails to reach itsintended recipients. A large, cumbersome and tumor-like bureaucracy sponges upor siphons off spending budgets.[208] Indias absence rates are one of the worst inthe world; one study found that 25% of public sector teachers and 40% of publicsector medical workers could not be found at the workplace.[209][210]The Indian economy has an underground economy, with an alleged 2006 report bythe Swiss Bankers Association suggesting India topped the worldwide list for blackmoney with almost $1,456 billion stashed in Swiss banks. This amounts to 13times the countrys total external debt.[211][212] These allegations have been deniedby 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 opposition circles,and circulated as gospel truth. However, this story was a complete fabrication. TheSwiss Bankers Association never published such a report. Anyone claiming tohave such figures (for India) should be forced to identify their source and explainthe methodology used to produce them."[213][214]EducationIndia has made huge progress in terms of increasing primary education attendancerate and expanding literacy to approximately three-fourth of the [215]population. Indias 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 legislation hasbeen enacted to further the objective of providing free education to allchildren.[216] However, the literacy rate of 74% is still lower than the worldwideaverage and the country suffers from a high dropout rate.[217] Further, there exists asevere disparity in literacy rates and educational opportunities between males andfemales, urban and rural areas, and among different social groups.[218]
  35. 35. Infrastructure Shown here is the Chennai Port. An aerial view of the Yamuna Expressway in Greater NoidaIn the past, development of infrastructure was completely in the hands of thepublic sector and was plagued by slow progress, poor quality andinefficiency.[219] Indias low spending on power, construction, transportation,telecommunications and real estate, at $31 billion or 6% of GDP in 2002 hadprevented India from sustaining higher growth rates. This has prompted thegovernment to partially open up infrastructure to the private sector allowingforeign investment,[163][220] and most public infrastructure, barring railways, istoday constructed and maintained by private contractors, in exchange for tax andother concessions from the government.[221]While 80% of Indian villages have at least an electricity line, just 44% of ruralhouseholds have access to electricity. Some half of the electricity is stolen,compared with 3% in China. The stolen electricity amounts to 1.5% ofGDP.[222][223] Transmission and distribution losses amount to around 20%, as aresult of an inefficient distribution system, handled mostly by cash-strapped state-run enterprises.[224] almost all of the electricity in India is produced by the publicsector. Power outages are common, and many buy their own power generators toensure electricity supply.[225] As of December 2011, the monthly electricity
  36. 36. production was at 73,000 GWH,[226] with an installed capacity of 1.86 GW.[113] In2007, electricity demand exceeded supply by 15%.[225] However, reforms broughtabout by the Electricity Act of 2003 caused far-reaching policy changes, includingmandating the separation of generation, transmission and distribution aspects ofelectricity, abolishing licencing requirements in generation and opening up thesector to private players, thereby paving the way for creating a competitive market-based electricity sector.[227] Substantial improvements in water supplyinfrastructure, both in urban and rural areas, have taken place over the past decade,with the proportion of the population having access to safe drinking water risingfrom 66% in 1991 to 92% in 2001 in rural areas, and from 82% to 98% in urbanareas. However, quality and availability of water supply remains a major problemeven in urban India, with most cities getting water for only a few hours during theday.[228]Economic disparitiesIndia continues to grow at a rapid pace, although the government recently reducedits annual GDP growth projection from 9% to 8% for the current fiscal year endingMarch 2012. The slowdown is marked by a sharp drop in investment growthresulting from political uncertainties, a tightening of macroeconomic policiesaimed at addressing a high fiscal deficit and high inflation (going well beyond foodand fuel prices), and from renewed concerns about the European and USeconomies. Although the Government was quite successful in cushioning theimpact of the global financial crisis on India, it is now clear that a number of MDGtargets will only be met under the Twelfth Five Year Plan (2012–17)..— World Bank: India Country Overview 2011[169]A critical problem facing Indias economy is the sharp and growing regionalvariations among Indias different states and territories in terms of poverty,availability of infrastructure and socio-economic development.[229] Six low-incomestates – Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Orissa and UttarPradesh – are home to more than one third of Indias population. [230] Severedisparities exist among states in terms of income, literacy rates, life expectancy andliving conditions.[231]The five-year plans, especially in the pre-liberalization era, attempted to reduceregional disparities by encouraging industrial development in the interior regions
  37. 37. and distributing industries across states, but the results have not been veryencouraging since these measures in fact increased inefficiency and hamperedeffective industrial growth.[232] After liberalization, the more advanced states havebeen better placed to benefit from them, with well-developed infrastructure and aneducated and skilled workforce, which attract the manufacturing and servicesectors. The governments of backward regions are trying to reduce disparities byoffering tax holidays and cheap land, and focusing more on sectors like tourismwhich, although being geographically and historically determined, can become asource of growth and develops faster than other sectors.[233][234] In fact, theeconomists fail to realize that ultimately the problem of equitable growth orinclusive growth is intricately related to the problems of good governance andtransparency.In 2011 Engineering Jobs in India have been showing signs of steady growth.[235]