Indian Economy: An overview

India's economy is on the progressive note of an ever increasing growth curve.

With some 1.1 billion people, diverse regions, and a vibrant democracy, India has been making progress on a scale, size and pace that is unprecedented in its own history.

India's economy is on the progressive note of an ever increasing growth curve. With positive indicators of a stable 8 per cent annual growth, rising foreign exchange reserves of close to $140 billion, an emerging capital market with the popular Sensex topping the impressive 12,000 mark, increasingly flowing foreign direct investment (FDI) close to over $8 billion, and an over 21 per cent surge in exports, it is easy to understand why India is a leading destination for foreign investment and outsourcing destination.

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Highlights in 2005-2006

As per the data released by the government of India, the GDP grew by 7.4 per cent in the first quarter and 6.6 per cent in the second quarter of the current year, compared with 5.3 per cent and 8.6 per cent in the corresponding quarters of the previous year. The Economic Survey 2005-06 estimates that the GDP will grow at 8.1 per cent. Growth of Gross Domestic Product (GDP) at constant prices in excess of 8.0 per cent has been achieved by the economy in only five years of recorded history, and two out of these five are in the last three years.

Points to ponder • India has more billionaires than China. This year there were 15 billionaires in China but last year in India, there were 20 billionaires, according to the Forbes magazine. • India has emerged as the world's fastest growing wealth creator, thanks to a buoyant stock market and higher earnings. • A number of Indian companies surpassed last year's net profit in just six months of the current fiscal, reflecting an accelerated growth in corporate earnings. • Forty-four per cent of Top 100 Fortune 500 companies are present in India. • With its manufacturing and services sector on a searing growth path, India’s economy may soon touch the coveted 10 per cent growth figure.

Possibilities of agricultural production in 2005-06 are considered to be reasonably rosy due to near normal monsoon. The agricultural and allied sector's growth in 2005-06 is projected at 2.3 per cent. With a good crop prospects, food grain production is expected to increase to 209 million tonnes (MT) in 2005-06 from 204.6 MT in 2004-05.

Some important dimensions of the dynamic growth in recent years are: a new industrial revival; modest inflation despite spiralling global crude prices; a pick up in investment; rapid growth in exports and imports with a widening of the current account deficit; the launching of the National Rural Employment Guarantee (NREG) Scheme for inclusive growth and social security; and laying of some institutional foundations for faster development of physical infrastructure; progress in fiscal consolidation.

The industrial sector too has been at its best. The rate of growth of industrial sector as measured in terms of Index of Industrial Production (IIP) during April-December 2005-06 was 7.8 per cent. Impressive performance of the manufacturing sector, which grew at 8.9 per cent during this period, largely contributed to these figures.

In the nearly 60 years since its independence, the country has been successful on a number of fronts:

• Maintained electoral democracy
• Banished the spectre of famines
• Reduced absolute poverty by more than half
• Dramatically improved literacy
• Vastly improved health conditions
• Become one of the world’s fastest growing economies with average growth rates of 8% over the past three years
• Emerged as a global player in information technology, business process outsourcing, telecommunications, and pharmaceuticals
• Is now the world’s fourth largest economy in purchasing power parity terms.

(Courtesy: worldbank.org)