The Republic of India has a population of 1.2 billion according to the survey done in 2009. It covers an area of 3.1 million sq km. The major languages spoken there are Hindi, English and 16 other official languages. It is a nation of diverse religions Hinduism, Islam, Christianity, Sikhism, Buddhism, and Jainism. The Monetary unit used there is the Indian Rupee (INR) = 100 paisa. The major export sectors are agriculture products, textile goods, gems and jewellery, software services and technology, engineering goods, chemicals, leather products. The Gross National Income (GNI) per capita income in regards with the World Bank report, 2008 was US$ 1070.
It has the world’s largest democracy and second most populous country emerged as a major power in 1990s. India is highly diverse with its many languages, cultures and religion. A land of ancient civilisation, which unfolds its history dated as early as 1000 BC. Witnessing the creation and the demolition empires and kingdoms. It gained its independence on 15th August 1947. Thereafter, not looking back at what is left but what is there to make. After independence, the economic condition of the country was very poor. It addressed its economic crisis along with a combination of socialist planning and free enterprise. During the 1950s and 1960 the government focused on the Green Revolution thereby providing irrigation facilities combined with land redistribution schemes. India also focused on the education system by building infrastructures for schools colleges and universities thereby applied research facilities that trained one of the world’s largest scientific and technical establishments.
It has a powerful economy with is growing at a rapid pace. Religion, regional and cultural diversities exist against a background of poverty. This reflects in t he federal political system, whereby power is shared between the central government and the 28 states.
India was under the social democratic-based policies till the year 1991 when it opened its doors to liberalisation. Two factors facilitated the emergence of labialisation phase. First were industrialist themselves who were beginning to find the government controls very strict and second was the export performance from overseas workers in the middle east which led to a comfortable level of foreign exchange reserves. This policy opened the doors to international trade and investments. The main motive behind the transformation and the deregulation of earlier practices was to replace the social democratic polices with capitalism so that there would be a high economic growth which would in turn increase the industrial production for the wellbeing of Indian citizens.
Before the year 1991, the government had closed the Indian economy to the outside world. The Indian rupee was inconvertible and the high licensing fee prevented the foreign goods from entering the country. The country’s balance of payment crises in 1991 brought the country near bankruptcy. The International Monetary Fund (IMF) was bailed out in exchange for gold transferred to London as collateral. The Indian economy was at its worst and needed a reform. The Indian Government started to loosen the controls and the tariffs, duties and taxes were lowered. The country opened its doors to trade and investment. Privatisation was also encouraged and Globalisation was embraced slowly.
Post the liberalisation, India progressed in areas like foreign investments, reforming the capital markets, deregulation of domestic business and reforming the trade market. In the year 1993 the National Stock Exchange was introduced. They remained at the forefront of modernisation of India’s capital and financial market. The share of consumer goods manufactured in India increased from 50.6% in 1990 to 72.5% during the five year trial period. The share of labour intensive exports in total manufactured exports increased from 13% to 34%. The share of High tech exports increased from 13% to 31%. The proportion of capital goods in total manufacturing imports increased from 26% to 61%. India increased their share of total exports.
An overall effect in an increase in the trade was evident however there was no change in the Gross domestic product which still continued at 5.7%. The prices for food, beverage, tobacco animal, machinery and transport equipment fell marginally. The Indian companies suffered huge loss and competition from the foreign market. Quoting an example of the Ludhiana Knitwear company which specialised in garment manufacture suffered a loss of 21%.
However, there was a lack of growth in the industrial sector which was earlier at 6.8% compared t 6.4%. India was now a market based economy.
A revival of economic reforms and better economic policy in 2000’s accelerated India’s economic growth rate. India’s Population had touched 1,028,610,328 and the growth rate of 2.11%. The whole nation’s economic infrastructure was undergoing stress. However the people below the poverty line percentage had drastically improved owing to the different provisions and self employment schemes introduced by the government. Stress was being laid on rural development as 70% of the Indian population were still living in villages. India was ranked fourth in terms of Purchasing Power Parity (PPP) IN 2001. The Foreign direct investment (FDI) inflows increased by 65% as compared to the previous year, where are the Global FDI during that time had decreased by 40%. This was definitely an encouraging factor for the country. As quoted in the ‘world investment prospect 2002’ report, there was an annual Foreign direct investment (FDI) inflow of US$ 5.3 billion from 2002 until 2006.
During the year 2005 – 2006 the overall production growth was 8.3% which was marginally lower than that of the previous year. Manufacturing speed had increased. Growth in the capital goods sector was there by 3 percentage higher than 2005. This was the time when sectors like the cotton textile, basic metals, transport, food products, jute and other fibber textiles, manmade textiles and rubber growth rate increased marginally. Exports were at an increase of 16.19% from the previous year however the oil import showed a sharp rise of 63%. The total Foreign Direct Investments (FDI) accounted for a $ 8472 million. This also impacted the foreign exchange reserve by a fall of 3.4%. The Indian rupee held the same value against the US$ but weakened its position against the Euro by 0.47%.
Sharing direct trade links with the United Nations India too was affected because of recession. The export percentage went down almost by a quarter. Unemployment increased as the company’s started to lay of their employees to cut down on the expenses. The textile and the handicraft industry were the worst affected. Figures reported from the FIEO (Federation of Indian export organisation) also revealed that the Tourist inflow had gone down by 37%.
The year 2009 saw a decrease in the growth rate by 6.8% as well as the return of a large projected fiscal deficit of 6.8% of GDP which would be highest among the worlds.
According to the recent reports provide over an year, India has been ranked as the eleventh largest economy in the world by nominal GDP and the fourth largest purchasing power party. The strong economic reforms adopted in the early 1990’s proved to be good for the country’s fast paced economy and a free market activity for international competition and foreign investment. India is growing at a rapid pace and will soon emerge as a strong economic power with huge human and natural resources with skilled and experienced individuals. Today India is characterised as mainly a market economy.
India’s service industry accounts for a total of 55% of the country Gross Domestic Product (GDP) while the industrial and the agricultural sector contribute to about 28% and 17% of the Gross domestic Product (GDP) respectively. Agriculture till date is the most predominant occupation of India and accounts for a total of 52% of the employment alone. The service sector accounts for another 34% of the employment hold and is followed by the industrial sector with a percentage of 14% of the employment. The labour force collectively holds half a million workers. In the agricultural field the major production is that of wheat, rice, oilseed, cotton, juice, tea, sugarcane, potatoes, cattle, water buffalo, sheep, goat, poultry and fish. In the industries consists of other subdivisions such as telecommunication, textiles, chemicals, food processing, steel, transportation, equipment, cement, mining, petroleum, machinery, information technology enabled services and software’s.
As discussed previously the per capita income of India according to the World Bank report of 2008, is US$ 1,030 and is ranked on 139th position in the world. However it’s per capital production (PPP) is ranked 128th in the world at US$ 2,940. This shows that the trade had increased in a very short span of time which can be estimated roughly at 20 years time frame as India earlier was a closed economy. A total of 2% of the world trade has been recorded by the World Trade Organisation and India’s total merchandise is estimated at a total value of US$ 294 in the year 2006 and India’s total service trade inclusive of both import and export was estimated at US$ 143 billion. Thus, a collective total of US$ 437 billion in the year 2007 in comparison to the year 2004 at a total of US$ 253 billion. There has been a remarkable growth of 72% in this context. There has been a more evident increase in the GDP share by 24% in comparison to a minor share of 6% in the early 1990’s
The year 2009 when the entire world was still in the midst of the recession crises, India was able to escape the condition of extreme poverty even though the major trade links were with the United Nations. India recorded its highest GDP of 9% in the year 2007. This was the effect of liberalisation and its height. India now stands on the second position after China after having labelled itself as the fastest growing economy. In a report by an Organisation for Economic Co-operation and Development (OECD), it states that the average growth rates of 7.5 % will double the average income in a decade. The inclusion of a few more reforms would accelerate the pace. In regards to China who liberated its economy in the year 1978, India is still at a slow pace and needs to continue liberalisation for the betterment of the country. Also reports reveal that provide all the obstacles in the path of liberalisation are removed, India would grow at a pace 10% higher than that of China.
According to a report by the CIA World Fact book, it states that India escaped the brunt of global financial crisis because of the cautious banking policies and a relatively low dependence on export of growth. The domestic demand, driven by the purchases of consumer durables and auto (SOURCES, 2010) mobiles, has emerged as the key driver of the economy, as exports have fallen ever since the global crisis has started. India’s fiscal; deficit increased substantially in 2008 due to fuel and fertilizer subsidies, a dept waiver program for farmer, a job guarantee program for rural workers and stimulus expenditure.
Economists have also predicted that by the year 2020, India will be among the largest economies of the world. The Indian government has already declared their commitment to the fiscal stimulus and the deficit reduction in the next two years. The government has also proposed the privatisation of some of the public industries owned by the government. The government has also forecasted the expenses for the necessary equipment and resources required for the removal of long term challenges which include inadequate physical and social infrastructure to carry out the necessary reforms. The only challenge that the Indian Economy will have to face in due course of time is the huge and growing population and their fundamental, social and environmental problems.