Economy of India - Overview

Overview

The combination of protectionist, import-substitution, and Fabian social democractic-inspired policies governed India for sometime after the end of British occupation. The economy was then characterised by extensive regulation, protectionism, public ownership of large monopolies, pervasive corruption and slow growth. Since 1991, continuing economic liberalisation has moved the country towards a market-based economy. By 2008, India had established itself as one of the world's fastest growing economies. Growth significantly slowed to 6.8% in 2008–09, but subsequently recovered to 7.4% in 2009–10, while the fiscal deficit rose from 5.9% to a high 6.5% during the same period. India’s current account deficit surged to 4.1% of GDP during Q2 FY11 against 3.2% the previous quarter. The unemployment rate for 2010–11, according to the state Labour Bureau, was 9.8% nationwide. As of 2011, India's public debt stood at 68.05% of GDP which is highest among the emerging economies. However, inflation remains stubbornly high with 7.55% in August 2012, the highest among its BRICS counterparts.

India's large service industry accounts for 57.2% of the country's GDP while the industrial and agricultural sectors contribute 28.6% and 14.6% respectively. Agriculture is the predominant occupation in Rural India, accounting for about 52% of employment. The service sector makes up a further 34%, and industrial sector around 14%. However, statistics from a 2009–10 government survey, which used a smaller sample size than earlier surveys, suggested that the share of agriculture in employment had dropped to 45.5%.

Major industries include telecommunications, textiles, chemicals, food processing, steel, transportation equipment, cement, mining, petroleum, machinery, software and pharmaceuticals. The labour force totals 500 million workers. Major agricultural products include rice, wheat, oilseed, cotton, jute, tea, sugarcane, potatoes, cattle, water buffalo, sheep, goats, poultry and fish. In 2011–2012, India's top five trading partners are China, United Arab Emirates, United States, Saudi Arabia and Switzerland.

Previously a closed economy, India's trade and business sector has grown fast. India currently accounts for 1.5% of world trade as of 2007 according to the World Trade Statistics of the WTO in 2006, which valued India's total merchandise trade (counting exports and imports) at $294 billion and India's services trade at $143 billion. Thus, India's global economic engagement in 2006 covering both merchandise and services trade was of the order of $437 billion, up by a record 72% from a level of $253 billion in 2004. India's total trade in goods and services has reached a share of 43% of GDP in 2005–06, up from 16% in 1990–91. In the year 2010–11 India's total merchandisee trade (counting exports and imports) stands at $ 606.7 billion and is currently the 9th largest in the world. During 2011–12, India's foreign trade grew by an impressive 30.6% to reach $ 792.3 billion (Exports-38.33% & Imports-61.67%).