The document provides an overview of the history and development of the Indian economy from pre-colonial times to the present. It discusses key phases and sectors that have shaped the economy. The pre-colonial economy was well-developed with trade, but the colonial period caused economic depletion as the British extracted resources. Post-independence, planned economic development began, and sectors like agriculture, industry and services now contribute significantly to GDP. The economy has grown substantially but still faces challenges like poverty, unemployment and rural-urban disparities.

1. India
India Economy
The Indian economy, which is the third largest in the world in terms of purchasing power, is
going to touch new heights in the coming years. As predicted by Goldman Sachs, the Global
Investment Bank, by 2035 India would be the third largest economy in the world just after U.S.
and China. It will grow to 60% of size of the U.S. economy. This booming economy of today has
passed through many phases before it achieved the current milestone.
History of Indian Economy
The history of Indian economy can be broadly divided into three phases: pre-colonial, colonial
and post colonial.
Pre-Colonial: The economic history of India since Indus Valley Civilisation to 1700 AD can be
categorised under this phase. During Indus Valley Civilisation, the Indian economy was very
well developed. It had very good trade relations with other parts of the world, which is evident
from the coins of various civilisations found at the site of Indus Valley.
Before the advent of the East India Company, each village in India was a self-sufficient entity
and was economically independent as all the economic needs were fulfilled within the village.
Colonial Indian Economy: The arrival of the East India Company in the country caused a huge
strain on the Indian economy and there was a two-way depletion of resources. The British would
buy raw materials from India at cheaper rates and the finished goods were sold at higher than
normal price in Indian markets. During this phase India's share of world income declined from
22.3% in 1700 AD to 3.8% in 1952.
Post Colonial Indian Economy: After India got Independence from colonial rule in 1947, the
process of rebuilding the economy started. For this various policies and schemes were
formulated. First five-year plan for the development of Indian economy came into
implementation in 1952. These Five-Year Plans, started by Indian government, focussed on the
needs of the Indian economy.
If on one hand agriculture received the immediate attention on the other the industrial sector was
developed at a fast pace to provide employment opportunities to the growing population and to
keep pace with the developments in the world. Since then the Indian economy has come a long
way. The Gross Domestic Product (GDP) at factor cost, which was 2.3 % in 1951-52 reached 6.5
in the financial year 2011-2012.
Trade liberalisation, financial liberalisation, tax reforms and opening up to foreign investments
were some of the important steps, which helped Indian economy to gain momentum. The
Economic liberalisation introduced by Manmohan Singh in 1991, the then finance minister in the
government of P V Narasimha Rao, proved to be the stepping-stone for Indian economic reform
movements.
Sectors of Indian Economy

2. In any society, economy is classified into different sectors or components. A group of certain
economic activities forms different sectors. The economic activities are the outcome of the
production of good and services. In India, there are mainly three different sectors of the economy
- primary sector, secondary sector and tertiary sector. Read More...
Major Contributors to the Indian Economy
Three major sectors contribute to the Indian economy and the GDP of the country. These are: (i)
agriculture - which includes crops, milk, animal husbandry, fishing, forestry and some other
activities. (ii) industry - which includes several manufacturing sub-sectors, and (iii) services -
which includes retail, construction, software, communication, IT, banking, healthcare and other
economic activities.
Agriculture - In agriculture production, India ranks second in the world. Agriculture and related
activities accounts for about 18% of the total GDP and also employ approximately 50% of the
total workforce of the country. The agriculture sector's contribution to the economy has been
increasing with every financial year. In the financial year 2013-14, food grain production in the
country stood at 264 million tonnes. Read More...
Industry - Industry contributes about 26% of the GDP and 22% of the total workforce in India is
associated with industry sector. There are many sub-sectors in industry which generate revenue
for this sector such as petroleum, engineering, pharmaceuticals, mining, textile and many more.
Read More...
Services- The Indian service sectors account for about 60% of the total GDP. Information
technology (IT), IT enabled services (ITeS) and e-commerce has led to the growth of this sector.
The services sector has also attracted the highest amount of foreign equity with the government's
foreign direct investment (FDI) policies. Read More...
Challenges before Indian economy:
 Population explosion: The rising population is eating into the success of India.
According to 2011 census, the population of India has crossed one billion and is growing
at a rate of 2.11% approximately. Such a vast population puts lot of stress on economic
infrastructure of the nation. Thus India has to control its burgeoning population.
 Poverty: As per records of National Planning Commission, 36 crore people were living
below the poverty line in India in 2012.
 Unemployment: The increasing population is pressing hard on economic resources as
well as job opportunities. Indian government has started various schemes such as Jawahar

3. Rozgar Yojna, and Self Employment Scheme for Educated Unemployed Youth
(SEEUY). But these are proving to be a drop in an ocean.
 Rural Urban Divide: It is said that India lies in villages. Even today when there is lot of
talk about migration to cities, 70% of the Indian population still lives in villages. There is
a very stark difference in the pace of rural and urban growth. Unless there isn't a balanced
development Indian economy cannot grow.
These challenges can be overcome by the sustained and planned economic reforms.
These include:
 Maintaining fiscal discipline
 Orientation of public expenditure towards sectors in which India is faring badly such as
health and education.
 Introduction of reforms in labour laws to generate more employment opportunities for the
growing population of India.
 Reorganisation of the agricultural sector, introduction of new technology, reducing
agriculture's dependence on monsoon by developing means of irrigation.
 Introduction of financial reforms including privatisation of some public sector banks.
India's GDP rate since 1951-14:
Years
Agriculture,
forestry &
fishing,
mining and
quarrying (in
%)
Manufacturing,
construction,
electricity, gas
and water
Supply (in %)
Trade, hotels,
transport &
Communication
(in %)
Financing,
insurance,
real estate
and
business
Services (in
%)
Community,
Social &
Personal
Services (in
%)
Gross
domestic
product
at factor
cost (in
%)
1951-
52
1.9 4.6 2.6 2.3 3 2.3
1952-
53
3.1 -0.4 3.3 4.2 2.1 2.8
1953-
54
7.5 6.2 3.7 1.4 3.1 6.1
1954-
55
3 8.8 6.5 3.7 3.6 4.2
1955-
56
-0.8 11.7 7.3 4 3.1 2.6
1956-
57
5.4 9 7.3 1.6 3.8 5.7
1957- -4.1 -1.8 3.1 3.8 4.5 1.2

4. 58
1958-
59
9.8 7.4 5 2.8 4.1 7.6
1959-
60
-0.8 7 6.3 3.8 4.3 2.2
1960-
61
7.1 10.8 8.6 2.1 4.9 7.1
1961-
62
0.3 6.9 6.5 4.3 4.7 3.1
1962-
63
-1.4 6.2 5.9 3.4 7.1 2.1
1963-
64
2.4 10.7 7.1 3.1 6.6 5.1
1964-
65
8.8 7.4 6.8 2.7 6.6 7.6
1965-
66
-9.9 3.2 1.8 3 4 3.7
1966-
67
-1.2 3.7 2.6 1.8 4.6 1
1967-
68
14.1 3.3 4.3 2.7 3.9 8.1
1968-
69
0 5.1 4.5 4.9 4.5 2.6
1969-
70
6.3 7.8 5.4 4.2 5.5 6.5
1970-
71
6.3 1.6 4.9 4.2 5.5 5
1971-
72
-1.7 2.5 2.3 5.2 4.5 1
1972-
73
-4.4 3.4 2.2 3.9 3.3 0.3
1973-
74
6.9 0.5 4.2 2.4 2.6 4.6
1974-
75
-1.2 1 6 -0.3 4.7 1.2
1975-
76
12.8 6.5 9.1 6.9 3.5 9
1976-
77
-5.2 9.3 4.5 7.9 2.8 1.2
1977-
78
9.6 7.4 6.7 4.9 2.7 7.5
1978-
79
2.3 7.3 8.2 7.1 4.3 5.5
1979-
80
-11.9 -3.6 -0.8 1 7.3 5.2
1980- 12.8 4.5 5.6 1.9 5 7.2

5. 81
1981-
82
5.2 7.4 6.1 8.1 2.1 5.6
1982-
83
0.6 0.2 5.5 9.5 7.7 2.9
1983-
84
9.5 8.5 5.1 9.8 3.7 7.9
1984-
85
1.6 4.4 4.8 7.5 6.9 4
1985-
86
0.7 4.3 8 9.8 5.7 4.2
1986-
87
0.6 4.9 6 10.5 7.5 4.3
1987-
88
-1.1 5.8 5.1 7.3 7.2 3.5
1988-
89
15.7 8.2 6 9.8 6 10.2
1989-
90
1.8 8.4 7.4 12.4 7.9 6.1
1990-
91
4.7 6.9 5.2 6.2 4.4 5.3
1991-
92
-1.4 -0.1 2.3 10.8 2.6 1.4
1992-
93
6 3.6 5.6 5.4 6 5.4
1993-
94
3.1 6.1 6.9 11.2 4.5 5.7
1994-
95
5.2 9.1 9.9 3.9 2.3 6.4
1995-
96
0 12 13.4 8.1 7.3 7.3
1996-
97
8.9 7.2 8.1 6.2 8.1 8
1997-
98
-1.3 3.3 7.5 11.7 8.3 4.3
1998-
99
5.9 4.3 7.7 7.8 9.7 6.7
1999-
00
2.8 6.2 11.4 13 12 8
2000-
01
0.3 6.5 6.4 3.5 4.6 4.1
2001-
02
5.5 2.7 8.6 6.2 4 5.4
2002-
03
-4.9 7.1 8.3 7.2 3.8 3.9
2003- 8.2 7.9 11.2 5.3 5.3 8

6. 04
2004-
05
1.1 10 9.5 7.7 6.8 7.1
2005-
06
4.6 10.7 12 12.6 7.1 9.5
2006-
07
4.6 12.7 11.6 14 2.8 9.6
2007-
08
5.5 10.3 10.9 12 6.9 9.3
2008-
09
0.4 4.7 7.5 12 12.5 6.7
2009-
10
1.5 9.5 10.4 9.7 11.7 8.6
2010-
11(3R)
8.3 7.6 12.2 10 4.2 8.9
2011-
12(2R)
4.4 8.5 4.3 11.3 4.9 6.7
2012-
13(1R)
1 1.2 5.1 10.9 5.3 4.5
2013-
14(PE)
4 0.5 3 12.9 5.6 4.7
Major Sector of Indian Economy
PrimarySector
Overview:The primarysectorof Indianeconomydependsdirectlyonnatural resourcestoexecute the
variousprocessesandmanufacture the goodsandservicesneededtokeepthe wholeoperationgoing.
Examplesof primary sector:In India,agriculture isthe biggestexampleof the primarysector.However,
forestryandfishingcanalsobe citedasother examplesof thisparticularsector.
Problems:Expertsopine thatunderemploymentanddisguisedunemploymentare the majorproblems
beingexperiencedbythe primarysector.Inthe firstcase the workersare not workingtothe bestof
theirabilitiesandinthe secondcase workersare there buttheyare not able to fulfill theirtrue
potential.The productionprocesscarriesonevenif peopleare relievedof theirduties.
Solutions:Expertsfeel thatinthisscenariothe government,boththe national andthe states,can
increase the fundsbeingspent forimprovementof irrigationfacilitiesandalsoprovide loansfor
purchasinghighqualityfertilizersandseeds.The storage andtransportfacilitiescanalsobe bettered –
the local bankscan alsoplaya critical role inthisregard by providingloanswithmore convenientrates.

7. The governmentsalsoneedtodetermine andthenfosterservicesandindustriesinthe semi urbanand
rural areas.Thiscan increase employment.Greaterhealthandeducational benefitscanalsobe made
available soasto generate more jobs.Promotionof heritagetourismisanotherwaytohelpthissector.
Governmentassistance:The Indiangovernmenthas,however,takensome constructivestepsto
addressthese problems.Ithasstartedthe National Rural EmploymentGuarantee Act 2005 whereby
people capable of workingare assuredaminimumof 100 daysof employment.Italsoprovides
unemploymentallowancetopeople if theyare notemployedinthe statedperiod.
Global standing:Intermsof agricultural productionIndiaoccupiesthe secondspotinthe world.
Economic contribution:Agriculture andrelatedsectorssuchas forestry,logging,andfishingcontribute
almost15.7 percentof the national GDP
Employmentgeneration:The primarysector providesworkopportunitiesforapproximately52.1
percentof the available workforce.Inspite of itsrecentdeclinethissectorstill remainsone of the major
constituentsof the national economy.A reportbythe PlanningCommission,however,statesthat
employmentmaygodownthanksto betterproductivity.
SecondarySector
Overview:Inthe secondarysectorof the national economy,natural ingredientsare usedtocreate
productsand servicesthatare consequentlyusedforconsumption.Thissectorcanbe regardedasone
that addsvalue to the productsand servicesonoffer.
Examples:The majorexamplesof thissectorare manufacturingandtransporting.
Employmentgeneration:The variousindustriesinIndiaemployalmost14 percentof the aggregate
workforce inthe country.
Economic contribution:The secondarysectorof Indianeconomycontributesalmost28 percentof the
GDP.
Global standing: Indiaoccupiesthe 12th
spot inthe worldwhenitcomesto nominal factoryproduction
inreal terms.
TertiarySector
Overview:Indianeconomy’s tertiarysectorisalsoreferredtoasservice sectorthat playsan important
role indevelopmentof the othertwosectors.Like the secondarysectoritalsoprovidesvalue addition

8. for a product.
Global standing:Withregardsto outputinthe servicessector,Indiaoccupiesthe 13th
spotin the world.
Employmentgeneration:Itemploysapproximately23 percentof the Indianworkforce
Yearlygrowth rate:The tertiaryeconomicsectorof Indiahas a yearlygrowthrate of almost7.5 percent.
Economic contribution:This sectoraccounts foralmost55 percentof India’sGDP.
Private and Public sector in India
Overview:The maindifference betweenthe privateandpublicsectorsof Indianeconomyisthatinthe
latera group of individualsoran individual holdsthe rightstothe propertieswhereasinthe second
instance the governmentisthe owner.
Operational goals: With a publiclyheldcompanythe mainaimbehindoperationsissocial welfare while
for the private sectorprofitsare the maindrivers.
Examples:Railwaysandpostofficesare the majorexamplesof the publicsectorentitieswhile
companieslike Tata,Ambani,andBirlagroupsare the most prominententitiesfromthe private sector
inIndia.
Growth predictions:Aspera reportby the IndianPlanningCommission,the privatesectorinIndiacan
generate 2500 businessopportunitiesinthe comingdecade.Ithasbeenestimatedthatatleast10
thousandstart upswill have tobe createdfor thisto be a reality.Itisalsoexpectedthatthese
companiescantogetherearnrevenuestothe tune of 200 billiondollars.However,the forecastinthe
publicsectoristhat the job growthrate will be ratherslow inthe years ahead.
Challenges:Boththe sectorsare requiredtocreate 10 to 15 millionjobssothatthe nextgenerationcan
be providedmeaningful employment.Forthisitisimportanttofosteran environmentof businessand
entrepreneurship.Sinceentrepreneurshipismostlydrivenbyinnovationitwill use lessernatural
resourcesandhelpIndiadeal betterwiththe following:
 Top classeducation
 Waste management
 Reasonablypricedhealthcare
 Financial inclusion
 Managementof cleanenergyresources
Employmentgeneration:The PlanningCommissionReportalsosaysthatthe bigcompaniesinboth
publicandprivate sectorshave notbeenable tocreate sufficientjobsanditisnot likelythattheywilldo
so inthe next10 or 20 years.These companiesare alsosupposedtoexperienceslow growthinthe next

9. fewyears.Jobsinthe private sectorhave not increasedinthe lastfew yearsthankstothe additionof
the followingfactorsandmore:
 automation
 profits
 digitization
In the last20 yearsthe bankingsectorhasincreaseditsassetsandrevenuesbymanyfoldsbutnotthe
jobs.
IndianEconomyOrganized andUnorganizedsector
Overview:Indianeconomycanalsobe classifiedintothe organizedandunorganizedsector.Inthe first
one the employmentrelatedconditionsare fairlyregularwhile incase of the latterthe governmenthas
no control.The organizedsectorisregisteredwiththe government,whichisnotthe case withthe
unorganizedone.The firstone adherestothe stipulationsandruleslaiddownbythe governmentwhile
the secondone providesirregularandlowerlevelsof payment.
Employmentconditions:The organizedsectorofferssome amountof jobsecurityandalsohas definite
workinghourswhile inthe unorganizedsectorthere iszerojobsecurityandtime dependsonthe
owner’swhims.The workersinthe firstone are liable tobe providedleaves,overtime payment,and
medical benefits,whichare notthere inthe secondone.The workatmosphere inthe organizedsectoris
mostlysafe andthere are basic amenitieslike water.However,itisprimarilythe opposite inthe
unorganizedsector.
Needfor governmentassistance:Expertsopine thatinthe unorganizedsectorinthe rural areas the
governmentcanassistthe farmersbythe properand timelyprovisionof the following:
 seeds
 storage facilities
 agricultural inputs
 markets
 credit
In the urban areasfollowingare the majordomainswhere the governmentscanpitchinvis-à-visthe
unorganizedsector:
 provisionof rawmaterial
 avoidance of anyeconomicandsocial prejudicestowardsworkers
 provisionof marketingoutput

10. Employmentgeneration:InIndiathere are approximately487 millionworkers,anumberprecededonly
by China.94 percentof thisworkforce isemployedinthe companiesthatbelongtothe unorganized
sectorand thisincludesgemsanddiamondpolishingentitiestopushcart sellers.
The organizedsectorismostlymade of workersthat are employedinthe publicsectorcompanies.Of
late the scalesare slowlytippinginthe favorof the private sectorwitha lotof Indiansstartingtheir
businessesandinternational entities comingintothe country.
Economic contribution:The numberof jobsmay have gone downinthe organizedsectorinthe recent
years.However,NationalSample Survey,andCentral StatisticsOffice datashow thatthe average
salarieshave gone upinthe same time.The sector hasalso become betterfromthe pointof view of
productivity.
Important componentsofIndianeconomy
Textile:The textilesectorisprecededonlybyagriculturewhenitcomestoprovisionof jobsinIndiaand
contributesapproximately 20percentof the total productioninthe southAsiancountry’s
manufacturingsector.Atleast200 millionpeopleare employedinthissector.
Retail: The retail sectorisregardedas one of the mainstaysof the national economyandone of the
majorreasonsfor that isitscontributionof approximately14to 15 percentto the national GDP.The
entire market’sworthhasbeenestimatedtobe at 450 billiondollars –itisone of the leadingmarkets
on a global basiswhenitcomesto economicworth.Italso has almost1.2 billioncustomersandis
experiencingquickgrowthinthatregard.
Tourism: Thisparticularsector isnot as developedasothersincomparisonbutithas beengrowingfairly
well.Itcreates8.78% of the total jobsin Indiainadditionto contributingnearabout6.23% of the
aggregate GDP. Most of the touriststoIndiaare fromthe UK and the US.
In additiontothe above mentionedones,mining,energyandpower,andbankingandfinance are
regardedas importantpartsof the Indianeconomy.- See more at:
http://business.mapsofindia.com/sectors/#sthash.Kn260m5b.dpuf
Agriculture Sector of Indian Economy
Agriculture Sector of Indian Economy is one of the most significant part of India. Agriculture
is the only means of living for almost two-thirds of the employed class in India. As being stated
by the economic data of financial year 2006-07, agriculture has acquired 18 percent of India's
GDP.

11. The agriculture sector of India has occupied almost 43 percent of India's geographical area.
Agriculture is still the only largest contributor to India's GDP even after a decline in the same in
the agriculture share of India. Agriculture also plays a significant role in the growth of socio-
economic sector in India.
In the earlier times, India was largely dependent upon food imports but the successive stories of
the agriculture sector of Indian economy has made it self-sufficing in grain production. The
country also has substantial reserves for the same. India depends heavily on the agriculture
sector, especially on the food production unit after the 1960 crisis in food sector. Since then,
India has put a lot of effort to be self-sufficient in the food production and this endeavor of India
has led to the Green Revolution. The Green Revolution came into existence with the aim to
improve the agriculture in India.
The services enhanced by the Green Revolution in the agriculture sector of Indian economy are
as follows:
 Acquiring more area for cultivation purposes
 Expanding irrigation facilities
 Use of improved and advanced high-yielding variety of seeds
 Implementing better techniques that emerged from agriculture research
 Water management
 Plan protection activities through prudent use of fertilizers, pesticides, and cropping
applications
All these measures taken by the Green Revolution led to an alarming rise in the wheat and
rice production of India's agriculture. Considering the quantum leap witnessed by the
wheat and rice production unit of India's agriculture, a National Pulse Development
Programme that covered almost 13 states, was set up in 1986 with the aim to introduce the
improved technologies to the farmers. A Technology Missionwas introduced in 1986 right
after the success of National Pulse Development Programme to boost the oilseeds sector in
Indian economy. Pulses too came under this programme. A new seedpolicy was planned to
provide entree to superior quality seeds and plant material for fruits, vegetables, oilseeds,
pulses, and flowers.
The Indian government also set up Ministry of Food Processing Industries to stimulate the
agriculture sector of Indian economy and make it more lucrative. India's agriculture sector
highly depends upon the monsoon seasonas heavy rainfall during the time leads to a rich
harvest. But the entire year's agriculture cannot possibly depend upon only one season.
Taking into account this fact, a second Green Revolution is likely to be formed to overcome
the such restrictions. An increase in the growth rate and irrigation area, improved water
management, improving the soil quality, and diversifying into high value outputs, fruits,
vegetables, herbs, flowers, medicinal plants, and bio-diesel are also on the list of the
services to be taken by the Green Revolution to improve the agriculture in India.
Industry Growth Rate in India GDP

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The Indianeconomyisthe twelfthbiggestinthe worldforithas the GDP of US$ 1.09 trillionin 2007. The
countryhas the secondfastestmajorgrowingeconomyinthe whole worldforithasthe GDP rate of
9.4% in 2006- 2007.
The contribution of the Industrial Sector in India GDP
The industrial sectorisone of the main sectorsthat contribute tothe IndianGDP.The countryranks
fourteenthinthe factoryoutputinthe world.The industrial sectorismade upof manufacturing,mining
and quarrying,andelectricity,watersupply,andgassectors.The industrial sectoraccountsforaround
27.6% of the IndiaGDP andit employsover17% of the total workforce inthe country.The GrowthRate
of the Industrial SectorinIndiaGDPcame to around5.2% in 2002- 2003. In thisyear,withinthe India
GDP, the miningandquarryingsectorcontributed4.4%,the electricity,watersupply,andgassector
contributed2.8%,and the manufacturingsectorcontributedaround5.7%.
The Growth Rate of the IndustrySectorin IndiaGDP came to around6.6% in2003- 2004 and inthisyear,
the electricity,watersupply,andgassectorcontributed4.8%,the miningandquarryingsector
contributed5.3%,and the manufacturingsectorcontributed7.1% inIndiaGDP.IndustryGrowthRate in
IndiaGDP came to 7.4% in2004- 2005, withthe manufacturingsectorcontributing8.1%,the miningand
quarryingsectorcontributing5.8%,andthe watersupply,electricity,andgassectorcontributing4.3% in
IndiaGDP.
IndustryGrowthRate inIndiaGDP came to 7.6% in2005- 2006. Inthisyear, the miningandquarrying
sectorcontributed0.9%,the manufacturingsectorcontributed9.0%,andthe water supply,gas,and
electricitysectorcontributed4.3%.The GrowthRate of the Industrial Sectorfinallycame to9.8% in
2006- 2007. This showsthatIndustryGrowthRate inIndiaGDP has beenonthe rise overthe lastfew
years.
Thereasonsforthe riseofIndustry GrowthRatein IndiaGDP
The reasonsfor the increase of IndustryGrowthRate in IndiaGDP are that huge amountsof investments
are beingmade inthissectorand thishas helpedthe industriestogrow.Furtherthe reasonsforthe rise
of the GrowthRate of the Industrial SectorinIndiaare that the consumptionof the industrialgoodshas

13. increasedagreat deal inthe country,whichinits turnhas boostedthe industrial sector.Alsothe
reasonsforthe increase of IndustryGrowthRate inIndiaGDP are that the industrial goodsare being
exportedinhuge quantitiesfromthe country.
TheIndiangovernmentmust boostthe Industrial Sector
IndustryGrowthRate inIndiaGDP thushas beenregisteringsteadygrowthoverthe pastfew years.This
has givenamajor boostto the Indianeconomy.The governmentof Indiathusmustcontinue tomake
effortstoboostthe industrial sectorinthe country.For thiswill inturnhelptogrow the country's
economy.
Service Sector of Indian Economy
Service Sector of Indian Economy contributes to around 55 percent of India's GDP during
2006-07. This sector plays a leading role in the economy of India, and contributes to around 68.6
percent of the overall average growth in GDP between 2002-03 and 2006-07.
There has been a 9.4 percent growth in the Indian economy during 2006-07 as against a rise of 9
percent in the same during 2006-06. During this growth in Indian economy, the service sector
witnessed a rise of 11 percent in the year 2006-07 against the 9.8 percent growth in 2005-06. The
service sectors of Indian economy that have grown faster than the economy are as follows:
 Information Technology (the most leading service sectors in Indian economy)
 IT-enabled services (ITeS)
 Telecommunications
 Financial Services
 Community Services
 Hotels and Restaurants
There has been a 13 percent hike in the service sectors of trade, hotels, transport and
communication in India's economy as compared to the 10.4 percent rise in the previous year. The
financial services that comprise of banks, real estate, insurance, and business services witnessed
a rise of 11.1 percent during 2006-07 against the 10.9 percent growth in the previous year.
Service sectors including community, social, and personal services experienced a growth of 7.8
percent during 2006-07 as against 7.7 percent growth in the previous year.
The service sector of India has also witnessed a remarkable rise in the global market apart from
the Indian market. It has experienced a rise of 2.7 percent in 2006 from that of 2 percent in 2004.
The broad-based services in the trade sector has undergone a large-scale rise. A statistics
concerning the growth of India's service sectors are listed below:
 The software services in Indian economy increased by 33 percent which registered a
revenue of USD 31.4 billion
 Business services grew by 82.4 percent
 Engineering services and products exports grew by 23 percent and earned a revenue of
USD 4.9 billion

14.  Services concerning personal, cultural, and recreational had a growth of 96 percent
 Financial services had a rise of 88.5 percent
 Travel, transport, and insurance grew by 23 percent
The software services in Indian economy along with the export of products is growing at a
massive pace and thereby witnessed an alarming rise of 35.5 percent and reached a lumpsome
amount of USD 18 billion. The IteS and BPO sectors grew by 33.5 percent and earned a revenue
of USD 8.4 billion. The service sector of Indian economy has been the most high-powered sector
in India's economy. It has also been focusing in various investments of late. As Indian economy
is looking forward for more liberalization, sectors like banking are on its way to loom large and
occupy a more significant position in India's economy.
Home / Business /The current BusinessClimate inIndia:Isitconducive forgrowth?
The current Business Climate in India: Is it
conducive for growth?
July28, 2014
by MeenaNair
The past few years have not been very favourable for India. With Gross Domestic Product
crawling at less than 5 percent and the burden of huge fiscal deficit on its shoulders, the growth
story of India was not something to be proud of. India was no longer shining.
Everyone was looking forward for a change and the expectation from the newly elected Narendra
Modi government that came to power in May 2014 was immense. Not just India but the whole
world waited to see the steps that the new government would take, especially the Budget that it
would present.
The Budget was presented on July 10 2014 by Finance Minister, Arun Jaitley. It was hailed by
many in the market as a please-all Budget. Though it did not deviate much from the previous
United Progressive Alliance (UPA) government in terms of direction, many were of the opinion
that this was the best that could have been done under given circumstances. While some
investors found it to be a decent budget that would promote growth, others were disappointed
that the radical reforms they had expected out of the Budget was missing.
Here are few points why some feel the current business climate is conducive for growth, while
others don’t agree:
Why people feel the business climate is conducive for growth?
Single majority
The biggest positive about the new government is that it has secured a clear majority by bagging
300 seats. This means that the National Democratic Alliance (NDA) government led by the

15. Bharatiya Janata Party has a definite say and may not have to compromise or give into the
demands of the coalition partners every now and then. One of the biggest drawbacks with the
previous UPA government was that it often had to bow under the pressure of coalition partners.
This acted as an impediment in the path of economic reforms.
The new government, many feel, is unlikely to face a similar situation and the economic reforms
that Prime Minister Modi had talked about during his election campaign may actually see the
light of the day, thus promoting economic growth in the country.
Raising the cap of FDI in insurance
The newly elected government’s go-ahead to raising the Foreign Direct Investment (FDI) cap
from 26 percent to 49 percent in the insurance sector has brought lot of cheer to the market,
especially in the cash-strapped insurance sector. This move, which allows the raise in cap even
while the management control lies with the Indian entity, is expected to attract long term capital
and will improve the overall investment scenario in the country. This proposal had been pending
since 2008.
Overall investment sentiments in India
In a survey conducted among the fund managers, the result showed that most of the respondents
felt that the investment mood in India is going to improve in the coming two to three years. They
felt the economy may grow in single digit now but would gradually improve over a long period.
They also expected the GDP to be less that 6 percent in 2014-15 and the inflation to be between
7 to 8 percent.
Why people feel the business climate is not very conducive for growth?
Stand on retrospective taxation
The retrospective taxation which was introduced in the UPA government had come under lot of
flak from the BJP before they were elected to power. Hence, the market was hoping that the
taxation would be scrapped altogether in the new Budget. However, Arun Jaitley did not scrap it
but assured that fresh cases of retrospective taxation would be scrutinised by high level
committees. That was any relief. Retrospective taxation has been termed by many as tax
terrorism that is scaring the foreign investors away. The most famous case being that of
Vodafone, which is caught in a USD 2.2 billion taxation row with the Indian government over
the acquisition of Indian mobile assets from Hutchison in 2007. With nothing much being done
about this issue, the foreign investors continue to eye India with wary eyes.
Inflation continues to be dirty
The consumer price inflation has been one of the biggest challenges for the government. It seems
to have dropped to 7.3 percent from the 8.3 percent in May. This is the lowest level the inflation
has reached since it started rising in January 2012. However, this news is not much of a comfort
and prediction has it that the inflation would continue to fluctuate between 7.7 and 7.5 percent
this year before going down to 7 percent next year. The Reserve Bank of India may also leave its
policy unchanged at 8 percent. That is not exactly helping boost the investors’ spirits.

16. Sentiments low after the Budget
Most of the investors were looking at the announcement of radical reforms in the new Budget,
but they admitted that they were left disappointed. They felt that the new government may not be
able to achieve the fiscal deficit target of 4.1 percent of the GDP and were of the strong opinion
that until they don’t see the Modi government take some concrete and substantial steps to carry
out the economic reforms that they were talking about, they are going to be cautious about
investing in India.
Conclusion
To conclude, while the business scenario in India is being viewed as positive by many, there are
others who feel otherwise. Having said that there is definitely an underlying hope that the new
government would usher in steps in the coming years that would once again put India in the
growth trajectory.