Indian economy before independence and after independence

1Growth story of India before and after independence
LOVELY PROFESSIONAL UNIVERSITY
ACADEMIC TASK NO. 2
School of Business
Name of the faculty member: Gurpreet Singh
Course Code: ECO121 Course Title: Macro Economics
Class: UG Term: Autumn
Section: Q4406 Batch: 2014
Max. Marks: 30 Date of Submission: 12th
week (April 6, 2015)
S.
No
Roll
No
Objectives of
Academic
Activity
Topic
Details
Evaluation
Parameters
Expected
Outcomes
1
2
3
B45
B46
B47
To encourage
students to think
analytically and
correlate
economic
concepts with
real life issues.
Each group
will be
allotted a
unique
topic. Each
group has to
submit
written up.
Class to be
divided into
groups and each
group allotted a
unique topic.
One group will
consist of three
students.
Evaluation will
be done on the
basis of peer
rating
This Academic task
has focus on the
following:
1) Helping
students
correlate
concepts of
economics
with real life
situations.
2) Enabling
students to
work as a
team
Note:
1. No Assignment will be catered after due date.
2. One Group will submit one write up in offline mode.
3. Students have to attach first page of acknowledgment and rubrics in write up, without
acknowledgment and rubric, write up is not to be accepted.
4. Peer rating should be done on the first page and should be signed by the entire group.
5. Evaluation should be done strictly on the basis of the Rubrics attached.
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EVALUATION PARAMTERS FOR WRITE UP
CATEGORY 1 2 3 4 5 Points
awarded
Introduction (topic
sentence)
(5marks)
The topic
sentence is an
excellent
introduction
to the
paragraph. It
tells the main
idea and gives
the big picture
(5)
The topic
sentence is a
good
introduction to
the paragraph.
It may too
broad or have
a detail
included. (4)
Introduces the
paragraph. It
does not
introduce the
topic very
well and it
includes too
many details.
(3)
The topic
sentence does
not introduce
the paragraph.
(2)
Does not
display an
understanding
of the topic.
Not in line
with the topic.
(1)
Sequencing
(Organization)(5marks)
Details are
placed in a
logical order
and the way
they are
presented
effectively
keeps the
interest of the
reader.(5)
Details are
placed in a
logical order,
but the way in
which they are
introduced
sometimes
makes the
writing less
interesting.(4)
Some details
are not in a
logical or
expected
order, and
this distracts
the reader.(3)
Many details
are not in a
logical or
expected
order. There is
little sense
that the
writing is
organized(2)
All topics are
not in logical
and expected
order. There is
very little
sense that
writing is
organized.(1)
Ideas , (5 marks) The topic has
been
discussed
from different
angles and
Student has
given
excellent
grasp of the
topic. (5)
The topic has
been discussed
properly and
Student has a
good grasp of
the subject. (4)
Student
knows the
subject but
not related it
with different
angles (3)
Student uses
just the facts
to relay
thoughts.
There is not
much of the
student's own
personality in
the writing (2)
Information is
gathered from
electronic
sources but
the student
does not know
its relevance
and
importance (1)
Grammar & Spelling
(Conventions)(5
marks)
Student
makes no
errors in
grammar or
spelling that
are grade
level
appropriate(5)
Student makes
a couple of
errors in
grammar or
spelling that
are grade level
appropriate.(4)
Student
makes several
errors in
grammar or
spelling that
are grade
level
appropriate(3)
Student makes
many errors in
grammar or
spelling that
are grade level
appropriate.(2)
Student makes
more than ten
errors in
grammar or
spelling that
are grade level
appropriate.(1)
Practical application
and relating concepts
with Real World and
Conclusion (10 mark)
Student makes
no errors in
appropriate
practical
application
and Detailed
conclusions
are reached
from the facts
offered.(10)
Student makes
little error to
relate the
concepts
practically and
Clear
conclusion is
reached from
the facts
offered.(8)
Student has
tried to relate
the concepts
practically
and Clear
conclusion is
reached from
the facts
offered. (6)
Student makes
many errors in
practical
application
and no clear
conclusion can
be formed
from the facts
offered.(4)
Student has
not related
with practical
applications
and no
conclusion can
be formed.(2)
TOTAL
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Indian Economy
Introduction
Indian Economy is the underdeveloped economy and our economy is a mixed economy where
the public sector co-exists with the private sector. In India the bulk of population lives in
conditions of misery. Poverty is not only active but is also chronic malady in India.
Fig. 1 Economic Survey 2014-15 Source:
www.financialexpress.com
India is likely to be the third largest economy with a GDP size of $15 trillion by 2030.The
economy of India is currently the world’s fourth largest in terms of real GDP (purchasing
power parity) after the USA, China and Japan and the second fastest growing major economy
in the world after China.
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The independence-era Indian economy (before and a little after 1947) was inspired by the
economy of the Soviet Union with socialist practices, large public sectors, high import duties
and lesser private participation characterizing it, leading to massive inefficiencies and
widespread corruption. However, later on India adopted free market principles and liberalized
its economy to international trade under the guidance of Manmohan Singh.
Facts about Indian economy
• Low per capita income.
• Inequalities in income distribution.
• Predominance of agriculture. (More than 2/3rd of India’s working population is
engaged in agriculture. But in USA only 2% of the working population is engaged in
agriculture.)
• Rapidly growing population with 1.2% annual change.
• Chronic unemployment (A person is considered employed if he / she works for 273
days of a year for eight hours every day.)Unemployment in India is mainly structural
in nature.
• Low rate of capital formation due to less saving rate.
• Dualistic Nature of Economy (features of a modern economy, as well as
traditional).Mixed Economy
• Follows Labour Intensive Techniques and activities.
Gross Domestic Product of India
The Gross Domestic Product (GDP) in India was worth 1876.80 billion US dollars in 2013.
The GDP value of India represents 3.03 percent of the world economy. GDP in India
averaged 517.27 USD Billion from 1970 until 2013, reaching an all-time high of 1876.80
USD Billion in 2013 and a record low of 63.50 USD Billion in 1970. GDP in India is
reported by the World Bank Group.
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Fig.2 GDP of India Source:
http://www.tradingeconomics.com/india/gdp
In January 2015, the government revised base year from 2004-05 to 2011–12. Also, changes
were made in Gross Domestic Product (GDP) reporting, GDP at factor cost will henceforth
be presented as Gross Value Added (GVA) at basic prices for industry-wise estimates, while
‘GDP at market prices’ will hence forth be referred to as ‘GDP’.
GDP performance in 2014–15 from the demand side (comprising
consumption, investment and net exports)
1. on the demand side, growth of private final consumption increased to 7.6 per cent in
2014–15, from 6.percent in 2013–14 as per advanced estimates.
2. The fixed capital formation in the economy has picked up growth but lost share in
aggregate demand. Gross fixed capital formation increased from 3.0 per cent in 2013–
14 to 4.1 per cent in 2014–15.
3. Exports in 2014–15 recorded a growth of just 0.9 per cent as compared to 7.3 per cent
in 2013–14. Imports, on the other hand, increased from -8.4 percent in 2013–14 to
-0.5 per cent in 2014–15, primarily due to the sharp decline in international oil prices
in the current year that compressed the oil import bill.
History and Growth story of Indian economy before independence
The history of India begins with the dawn of Indus Valley civilization which flourished in
3500 BC to 1800 BC. The Indus civilization's economy appears to have depended
significantly on trade, which was facilitated by advances in transport.
Its citizens practiced agriculture, domesticated animals, made sharp tools and weapons from
copper, bronze and tin and traded in terracotta pots, beads, gold and silver, coloured gem
stones such as turquoise and lapis lazuli, metals, flints, seashells and pearls. They used to
ships to reach Mesopotamia where they sold gold, copper and jewellery.
For the next 1500 years, India produced its classical civilizations which generated wealth in
huge amount. Between 1st
and 17th centuries AD, India is estimated to have had the largest
economy of the ancient and medieval world, controlling between one third and one fourth of
the world's wealth.
Economic growth of India in Mughal period
India's nationalist historians have portrayed its pre-colonial economy as a golden age of
prosperity, and this fabulous wealth set the Europeans on their great voyages of discovery.8
During the Mughal Empire at the end of the 16th century.
The gross domestic product of India in the 16th century was estimated at about 25.1% of the
world economy. An estimate of India's pre-colonial economy puts the annual revenue of
Emperor Akbar's treasury in 1600 AD at £17.5 million (in contrast to the entire treasury of
Great Britain two hundred years later in 1800 AD, which totalled £16 million). The gross
domestic product of Mughal India in 1600 AD was estimated at about 24.3% the world
economy, the second largest in the world.
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By this time the Mughal Empire had expanded to include almost 90 per cent of South Asia,
and enforced a uniform customs and tax-administration system. In 1700 AD the exchequer of
the Emperor Aurangzeb reported an annual revenue of more than £100 million.
India's wealth did indeed sustain more than 100 million people. With plenty of arable land, its
agriculture was certainly as productive as Western Europe's, and even the subsistence-
oriented peasant got a decent return.9 India also had a large, skilled workforce that produced
not only cotton but also luxuries for the aristocracy. Consequently, the economy produced a
large financial surplus, which was used to support the growing Mughal Empire and finance
spectacular monuments like the Taj Mahal.
GDP in millions of 1990 International Dollars
Fig. 3 GDP of India before independence Source: http://cgijeddah.mkcl.org
Economic growth of India in Pre-British period
The India economy in the pre-British period consisted of isolated and self-sustaining villages
on the one hand, and towns, which were the seed administration, pilgrimage, commerce and
handicraft, on the other. Means of transport or communication were highly underdeveloped
and so the size of the market very small.
India's nationalist historians have blamed the British Raj for India's poverty. The classic
nationalist case is that India had been rich before the British came and colonialism weakened
agriculture and “deindustrialized” India, throwing millions of artisans out of work. Britain's
trade policies encouraged the import of manufactures and the export of raw materials; finally,
it drained the wealth of India by transferring its capital to Britain.
The British East India Company whose political power gradually expanded in India from
1757 onwards, used huge revenue generated by the provinces under its rule for purchasing
Indian raw materials, spices and goods. Thus the continuous inflow of bullion that used to
come into India on account of foreign trade stopped altogether.
The Colonial government used land revenue for waging wars in India and Europe leaving
little for development of India. In short span of 80 years (1780-1860 AD) under Colonial
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rule, India changed from being an exporter of processed goods for which it received payment
in bullion, to being an exporter of raw materials and a buyer of manufactured goods.
More specifically, in the 1750s, mostly fine cotton and silk was exported from India to
markets in Europe, Asia, and Africa; by 1850s raw materials, which chiefly consisted of raw
cotton, opium, and indigo, accounted for most of India's exports.
India was a leading manufacturer in the 18th century
India was a leading manufacturing country in the world in the early 18th century. It had 22.6
percent share of the world's GDP, which came down to around 16 percent by 1820, closer to
its share of world population.13 It had a developed banking system and vigorous merchant
capital, with a network of agents, brokers and middlemen. Given the enormous financial
surplus, a skilled artisan class, large exports, plenty of arable land and reasonable
productivity.
India begins to re-industrialisation
Indian entrepreneurs began to set up their own modern textile mills after 1850 and very
slowly began to recapture the domestic market. In 1896, Indian mills supplied 8% of the total
cloth consumed in India; in 1913, 20%; in 1936, 62%; and by 1945, 76%.Although India did
not participate in global trade expansion between 1870 and 1913,
Indian businessmen made large profits during the First World War, which they reinvested in
after the war. Thus, India's manufacturing output grew 5.6 percent per year in 1913-38, well
above the world average of 3.3 percent.” The British government finally provided tariff
protection from the 1920s, which helped industrialists to expand and diversify.
By Independence in 1947, Indian entrepreneurs were strong and in a position to buy out the
businesses of the departing British. Industry's share in India's GNP had doubled from 3.8
percent (in 1913) to 7.5 percent (in 1947), and the share of manufactures in her exports rose
from 22.4 percent (in 1913) to 30 percent (in 1947).
The ruthless exploitation under British colonial rule completely devastated India’s economy.
India’s population was subject to frequent famines, had one of the world's lowest life
expectancies, suffered from pervasive malnutrition and was largely illiterate. As per British
economist, Angus Maddison India’s share of the world income went from27% in 1700 AD
(compared to Europe's share of 23%) to 3% in 1950.
INDIAN GROWTH 1900-2000
Colonial Post-Independence Reform Period
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Year 1900-1950 1950-1980 1981-1990 1991-2000
GDP growth 0.8 3.5 5.6 6.2
Per capita growth 0 1.3 3.5 4.4

Fig. 4 Indian Growth in 1900-2000 Source: http://gurcharandas.org/rich-nation-
poor
Monitoring the World Economy, 1820-1992 (Paris: OECD); 1990-2000: World Bank/IMF.
Although 1991 is the celebrated turning point of India's economic reforms, modest and
significant reforms began in the 1980s
Indian Economy: Journey after independence
Since 1951, India has grown as a planned economy. The first few plans focused on growth
with strengthening of the manufacturing sector emphasizing heavy industries to form the
backbone of the economy. Other principal areas of planning were agriculture and social
development i.e. Housing and poverty alleviation.
Over the years India saw a changing composition of its economic structure: agriculture which
initially comprised of 51.9% of the GDP now comprises around 16% and services comprise a
massive 60% of the GDP in 2014 growing from 30% in the 50s.
Fig. 5 Economic Journey Source: www.economictimes.com
Landmark changes in 1991 were brought about under pressure from IMF and World Bank
when India was left with foreign exchanges to barely support two weeks imports. The new
era saw delicensing, massive tariff reductions, FDI cap relaxations and gradual convertibility
of the current account followed by the capital account.
The liberalisation process started in the early nineties has seen massive growth especially in
the services sector. India has consistently grown at more than 6% over the last five years and
in terms of sheer GDP PPP currently stands at rank 4 in the world according to latest World
Bank estimates. However, when we look at GDP per capita by PPP we rank at 153 according
to the World Bank Liberalisation has helped India grow consistently and boost up its forex
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reserves through massive inflows of foreign funds both through FDI and FII establishing
India among the world’s top three most preferred investment destinations.
Economic developments is also very significant one in the development of any country. We
can consider it as a backbone of the country.in this 21st century Indian economy is one of the
most discussing matter among other country even India considering as a developing country.
In short, Indian economy has a bright future. But a better proper plan is very vital to develop
such a brilliant economy. Mainly Indian economy consist of agriculture, industries etc.
Three sectors of economy in India
India has classified and tracked its economy and GDP as three sectors — agriculture, industry
and services. Agriculture includes crops, horticulture, milk and animal husbandry,
aquaculture, fishing, sericulture, aviculture, forestry and related activities. Industry includes
various manufacturing sub-sectors. India's definition of services sector includes its
construction, retail, software, IT, communications, hospitality, infrastructure operations,
education, health care, banking and insurance, and many other economic activities.
Fig. 6 Structural growth Source: www.planningcommission.gov.in
GDP growth rates for agriculture, industry and services sectors realized during the Eleventh
Five Year Plan Period were at 4.1 percent, 7.7 per cent and 9.4 per cent against the growth
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target of 4 per cent, 10-11 per cent and 9-11 per cent respectively. The Twelfth Plan targets
growth rates of 4 per cent for agriculture, 7.6 per cent for industry and 9.0 per cent for
services, thereby aiming at 8 per cent growth in overall GDP
The growth rates for three sectors, namely, Agriculture, Industry and Services, were at 4.6
percent, 0.7 per cent and 6.9 percent respectively, during 2013-14 (i.e. the second year of
Twelfth Plan)
Growth performance of Agriculture Sector after independence
Agriculture, as a sector, has been playing a decisive role in shaping the overall growth
trajectories of the Indian economy since Independence. As is well-known, in the overall
Gross Domestic Product (GDP) of the country, the contribution of the primary sector (which
comprises agriculture, forestry and fishing, and mining and quarrying) has come down
substantially over the years, and, it accounts for 13.7 percent as of 2012-13. During 1950-51,
the primary sector was contributing 51.9 percent of the country’s GDP (at factor cost and at
2004-05 constant prices), which declined to 29.5 percent by 1990-91 and has shrunk further
to 13.7 percent by 2012-13.
Further, the share of ‘agriculture’ alone (within the primary sector) was recorded at a low of
11.6 percent in 2012-13, from a much higher share (in GDP) of 41.8 percent during 1950-51.
Much of this decline in percentage share of agriculture sector in the overall GDP of the
economy seems to have been due to the increasing contributions of other sectors, viz.
industry and services sectors, during the said period. Such a trajectory of economic
transformation, as witnessed in India, has been commonly observed across the world.
However, in spite of this decline in its share in the country’s GDP, half of India’s population
is still dependent on agriculture as the major source of their livelihood. Moreover, as a source
of raw materials for a number of sectors and its share in the country’s total exports, the
linkages of agriculture with overall economic growth and well-being are well established.
The Agriculture and Allied Sector is estimated to contribute approximately 13.9% of India’s
GDP (at constant 2004-05 prices) during 2011-12 as per advance estimate released by CSO
on 07.02.2012.
GDP of Agriculture and Allied Sectors and its share in the total GDP of the country during
the last 4 years, including current year, at 2004-05 prices, is as follows:
.
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Fig. 7 Agriculture Contribution Source: http://www.ekalavvya.com/
There has been a continuous decline in the share of Agriculture and Allied Sectors in the
GDP from 16.8 per cent in 2007-08 to 13.9 per cent in 2011-12 at 2004-05 prices.
Falling share of Agriculture and Allied Sectors in GDP is an expected outcome in a fast
growing and structurally changing economy.
Recent changes in agriculture sector
The agriculture sector grew at an impressive rate of 8.6 per cent in 2010-11 but declined to 5
per cent in the year 2011-12. However, it yielded an average of 4.1 per cent during the
Eleventh Plan Period, above the targeted growth rate of 4 per cent. There was further
moderation in the growth seen in the agriculture sector which, estimated at 1.4 per cent for
the year 2012-13 as per the First Revise Estimates. According to the Advance Estimates, it is
expected to grow at 4.6 per cent in the year 2013-14. This is based on an expected increase in
the production of food grains which is estimated to grow by 2.3 per cent, in comparison to a
decline of 0.8 per cent seen in data of the previous year by Department of Agriculture and
Cooperation (DAC).
Annual Growth Rate of GDP by Industry of Origin at Constant (2004-05) (percent)
Fig. 8 Growth Rate Source: www.planningcommision.gov.in
Growth performance of Industrial Sector after independence
Industrialisation has a major role to play in the economic development of the underdeveloped
countries. The gap in per capita income between the developed and underdeveloped countries
is largely reflected in the disparity in the structure of their economies.
From olden time onwards Indian industry was a renounced one. During that time, the
industrial set up was entirely traditional. There were many artisans and handicraft products,
which attracted the world market. After the colonization, it began to spread the modern
industries and the economic set up of India also began to change.
India is tenth in the world in factory output. Manufacturing sector in addition to mining,
quarrying, electricity and gas together account for 27.6% of the GDP. And 9th largest on
inflation adjusted constant 2005 US dollar basis ($197.1 billion).
The Indian industrial sector underwent significant changes as a result of the economic
liberalisation in India economic reforms of 1991, which removed import restrictions, brought
in foreign competition, led to the privatisation of certain government owned public sector
industries, liberalised the FDI regime, improved infrastructure and led to an expansion in the
production of fast moving consumer goods.
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Fig. 9 India Industrial Production Source: www.tradingeconomics.com/inida
This charts show the industrial production of India in various years. Industrial Production in
India averaged 6.54 percent from 1994 until 2015, reaching an all-time high of 20 percent in
November of 2006 and a record low of -7.20 percent in February of 2009. Industrial
Production in India is reported by the Ministry of Statistics and Programme Implementation
(MOSPI).
Recent changes in the industrial sector of India
Industrial growth also exhibited slowdown in the year 2012-13, at 1 per cent as per Revised
Estimates as compared to growth of 7.8 per cent in the year 2011-12. The decline in industrial
growth in the year 2012-13 may be attributed to the fall of the growth rates in the
'manufacturing' sector at 1.1 per cent, 'construction' which at 1.1 per cent, 'electricity, gas &
water supply' at 2.3 per cent and, 'mining and quarrying' at (-) 2.2 per cent.
These sector had higher growth rates in the year 2011-12 with the sectors of 'manufacturing'
at 7.4 per cent, 'construction' at 10.8 percent, 'electricity, gas and water supply' at 8.4 per cent,
and 'mining and quarrying' at 0.1 percent . In the comparatively low growth rates seen in
different sectors evidences that the industry sector had faced shortfalls growing at 0.2 per
cent in the first quarter of the year 2013-14, 2.3 percent
In the second quarter and registered a negative growth of 0.7 per cent in the third quarter. The
Advance Estimates for the year 2013-14 estimate growth of (-) 0.2 per cent in
'manufacturing', 1.7 percent in 'construction', 6 per cent in 'electricity, gas and water supply'
and (-) 1.9 per cent in 'mining and quarrying' sector; together yielding a growth rate of 0.7 per
cent for the industry sector during this period.
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Fig.10 Growth Rate Source: www.planningcommission.com
Government latest initiative to develop industrial sector
With launch of the ‘Make in India’ initiative, Mr Narendra Modi, the Prime Minister of India,
aims to give global recognition to the Indian economy and also place India on the world map
as a manufacturing hub.
India has also set for itself an ambitious target of increasing the contribution of
manufacturing output to 25 per cent of gross domestic product (GDP) by 2025, from 16 per
cent currently.
India's economy is expected to grow at 7.4 per cent in 2014-15 as per a Government forecast.
According to a new formula which uses 2011-12 as the new 'base year', the revised statistics
showed inflation-adjusted economic growth rate for October-December 2014 at 7.5 per cent,
making India the fastest growing major economy in the world.
Fig. 11 Manufacturing clusters of India Source: Google Images
E-biz project: Under the project a Government to Business (G2B) portal is being set up to
serve as a one stop shop for delivery of services to the investors and address the needs of the
business and industry from inception through the entire life cycle of the business. The process
of applying for industrial licence and industrial entrepreneur memorandum has been made
online
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Road Ahead
The Government of India has an ambitious plan to locally manufacture as many as 181
products. The move could help infrastructure sectors such as power, oil and gas, and
automobile manufacturing that require large capital expenditure and revive the Rs 1.85
trillion (US$ 29.74 billion) Indian capital goods business.
India is an attractive hub for foreign investments in manufacturing sector. Several mobile
phone, luxury and automobile brands, among others, have set up or are looking to establish
their manufacturing bases in the country.
With impetus on developing industrial corridors and smart cities, the government aims to
ensure holistic development of the nation. The corridors would further assist in integrating,
monitoring and developing a conducive environment for the industrial development and will
promote advance practices in manufacturing.
Growth performance of Service Sector after independence
The service sector, also called tertiary sector, is the third of the three economic sectors. The
service sector is an important part of the economy. India's services sector has the largest share
in the GDP, accounting for 57% in 2012, up from 15% in 1950. Information technology and
business process outsourcing are among the fastest-growing sectors.
A trend that started some two decades back is now well in its prime. Several multinational
firms continue to outsource their tele services and IT services to India. The acquisition of
expertise in information technology has led to the generation of thousands of new jobs, which
in turn increased domestic consumption and naturally, more foreign direct investments
happened to meet the demands.
India Services PMI
Services PMI in India increased to 53.90 Index Points in February of 2015 from 52.40 Index
Points in January of 2015. Services PMI in India averaged 51.37 Index Points from 2012
until 2014, reaching an all-time high of 57.50 Index Points in January of 2013 and a record
low of 44.60 Index Points in September of 2013.
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Fig.12 India Service PMI Source: www.tradingeconomics.com
Recent changes in the service sector of India
The growth in services sector was recorded at 7 per cent in 2012-13 as per Revised Estimates
and 6.9 per cent in the year 2013-14, according to the Advance Estimates as compared to 6.6
percent in the year 2011-12. However, growth in services sector declined from 6.7 percent in
the first quarter of 2013-14 to 6 percent in the second quarter, due to the stagnant growth in
'Trade, hotels, transport and communications', at around 4 per cent for both quarters.
And a significant fall in the growth rate of 'Community, social and personal services' from 9.4
percent in the first quarter of 2013-14 to 4.2 per cent in the second quarter. However, in the
third quarter of the year 2013-14,
'Trade, hotels, transport and communications' recorded a growth of 4.3 percent and growth in
'Community, social and personal services' rose to 7.0 percent, resulting in an increase in
service sector growth to 7.6 percent for the third quarter of 2013-14
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Fig 13 Growth Rate Source: www.planningcommission.gov.in
According to the Quarterly Estimates released by the CSO on 28th February, 2014. The
relatively slow pace of growth in services sector, over the years, is attributable in part to the
global crises faced during the Eleventh Plan, wherein growth of the service sector, a major
contributor to India's GDP, moderated to 9.7 per cent in the year 2010-11 and 6.6 percent in
the year 2011-12.The major drivers of growth in 2012-13 have been 'financing, insurance,
real estate and business services' (10.9 per cent), 'transport, storage and communication' (6
per cent) and 'community, social and personal services' (5.3 percent).
However, the moderation in growth of services sector is mainly attributed to a fall in the
growth rate of trade, hotels & restaurants and transport, storage & communication from 12
percent in 2010-11 to 1.2 per cent in 201112 and 12.6 per cent in 2010-11 to 9.4 percent
2011-12, respectively. In 2012-13, the growth of these sectors was recorded at 4.5 per cent
and 6 per cent respectively.
Employment in all sectors of India
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Fig. 14 Employment Rate Source: Google Images
Agriculture
India ranks second worldwide in farm output. Agriculture and allied sectors like forestry,
logging and fishing. As Indian economy has diversified and grown, agriculture's contribution
to GDP has steadily declined from 1951 to 2011, yet it is still the largest employment source
and a significant piece of the overall socio-economic development of India.
The changing structure of Indian agriculture in terms of employment and land holding. Is that
the share of agriculture in employment declined from about 82 percent in 1950/51 to about 53
percent in 2010 and the number is still declining.
Industrial Sector
Manufacturing sector in addition to mining, quarrying, electricity and gas together account
for 27.6% of the GDP and employ 17% of the total workforce. Economic reforms introduced
after 1991 brought foreign competition, led to privatisation of certain public sector industries,
opened up sectors hitherto reserved for the public sector
Service Sector
India's services sector has the largest share in the GDP, accounting for 57% in 2012, up from
15% in 1950.It is the 12th largest in the world by nominal GDP, and fourth largest when
purchasing power is taken into account. The services sector provides employment to 27% of
the work force. Information technology and business process outsourcing are among the
fastest-growing sectors, having a cumulative growth rate of revenue 33.6% between 1997 and
1998 and 2002–03 and contributing to 25% of the country's total exports in 2007–08. The
growth in the IT sector is attributed to increased specialisation, and an availability of a large
pool of low cost, highly skilled, educated and fluent English-speaking workers
Conclusion
17 | P a g e

India can become $10 trillion economy in 20 years
India has the potential to achieve 9 per cent growth rate and become a $10 trillion economy
by 2035 on the back of concerted efforts by the corporate sector and a constructive role
played by the government. Up to 40 per cent of India's $10 trillion economy of 2035 could be
derived from new solutions,
Fig. 15 Future of India Source: www.etcinternational.com
India will overtake China to become the world’s biggest economy in
less than 40 years, according to leading economist Douglas
McWilliams, chief executive of the Centre for Economics and
Business Research think-tank
Challenges to Economy of India
1. Inadequate supply of infrastructure
2. Corruption
3. Bureaucracy
4. Policy instability
5. Inflation
6. Financing
7. Workforce
8. Tax rates
9. Innovation
10. Forex
11. Security
12. Government instability/coups
13. Healthcare
18 | P a g e

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