The economy of India is the tenth-largest in the world by nominal GDP and the third-largest by purchasing power parity (PPP). The country is one of the G-20 major economies and a member of BRICS. India is the 13th-largest exporter and the 11th-largest importer in the world.
The independence-era Indian economy (from 1947 to 1991) was based on a mixed economy combining features of capitalism and socialism, resulting in an inward-looking, interventionist policies and the import-substituting economy that failed to take advantage of the post-war expansion of trade. This model contributed to widespread inefficiencies and corruption, and the failings of this system were due largely to its poor implementation.
India’s economy includes agriculture, handicrafts, industries, and a lot of services. Services are the main source of economic growth in India today, though two-thirds of Indian people earn their living directly or indirectly through agriculture. In recent times, due to its large number of well-educated people who can speak English, India became a pioneer in information technology.
Read Also: Industries Contributing to Indian Economy
For most of India’s independent history, it had strict government controls in many areas such as telecommunications (communication over long distances), banking and foreign direct investment. Since the early 1990s, India has slowly opened up its markets by reducing government control on foreign trade and investment. This was started by Manmohan Singh under the leadership of P.V.Narasimha Rao. From then, the Indian Economy grew at a rapid pace.
In the 21st century, India is an emerging economic power having vast human and natural resources. The south western state of Maharashtra contributes the highest towards India’s GDP among all states. Mumbai (Maharashtra) is known as the trade and commerce capital of India.
Economic growth has been defined as “an increase in real terms of the output of goods and services that is sustained over a long period of time, measured in terms of value added”. Economic growth is a dynamic concept and refers to continuous increase in output.
Don’t Miss: Domestic FMCG Firms Outpace MNCs in Growth
Factors in Economic Growth
- Human resources (labour supply, education, discipline, motivation)
- National resources (land, minerals, fuels, environmental quality)
- Capital formation (machines, factories, roads)
- Technology (science, engineering, management, entrepreneurship)
The social and economic problems India faces are the increasing population, poverty, lack of infrastructure (buildings, roads, etc.) and growing unemployment. Although poverty has gone down 10% since the 1980s, a quarter of India’s citizens still cannot pay for enough food.
Textile manufacturing is the 2nd largest source of employment after agriculture and contributes about 14 per cent to industrial production; 4 percent to the country’s gross domestic product (GDP); 17 percent in export earnings, providing direct employment to over 35 million people.
Mining forms an important segment of the Indian economy, with the country producing 79 different minerals (excluding fuel and atomic resources), including iron ore, manganese, mica, bauxite, chromite, limestone, asbestos, fluorite, gypsum, ochre, phosphorite and silica sand.
India ranks second worldwide in farm output. Agriculture and allied sectors like forestry, logging and fishing accounted for 17% of the GDP in 2012, employed 51% of the total workforce, and despite a steady decline of its share in the GDP, is still the largest economic sector and a significant piece of the overall socio-economic development of India.
Read Also: An Open Economy
The Indian rupee (INR) is the only legal tender in India and is also accepted as legal tender in the neighbouring Nepal and Bhutan, both of which peg their currency to that of the Indian rupee. The rupee is divided into 100 paise. The highest-denomination banknote is the INR 2,000 note; the lowest-denomination coin in circulation is the 50 paise coin; with effect from 30 June 2011, all denominations below 50 paise have ceased to be legal currency. India’s monetary system is managed by the Reserve Bank of India (RBI), the country’s central bank.
India is a founder-member of General Agreement on Tariffs and Trade (GATT) since 1947 and its successor, the WTO. While participating actively in its general council meetings, India has been crucial in voicing the concerns of the developing world. For instance, India has continued its opposition to the inclusion of such matters as labour and environment issues and other non-tariff barriers to trade into the WTO policies.