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World > Asia > India > Economy (Notes)

India - Economy (Notes)


ECONOMY
India's population is estimated at nearly 1.1 billion and is growing at 1.3% a year. It has the world's 12th largest economy--and the third largest in Asia behind Japan and China--with total GDP of around $797 billion. Services, industry and agriculture account for 51%, 28%, and 21% of GDP respectively. Nearly two-thirds of the population depends on agriculture for its livelihood. About 28% of the population lives below the poverty line, but there is a large and growing middle class of 325-350 million with disposable income for consumer goods.

India is continuing to move forward with market-oriented economic reforms that began in 1991. Recent reforms include liberalized foreign investment and exchange regimes, industrial decontrol, significant reductions in tariffs and other trade barriers, reform and modernization of the financial sector, significant adjustments in government monetary and fiscal policies, and safeguarding intellectual property rights.

Real GDP growth for the fiscal year ending March 31, 2006 was 8.4%, up from 7.7% growth in the previous year. Growth for the year ending March 31, 2007 is expected to be between 7.8-8.3%. Foreign portfolio and direct investment inflows have risen significantly in recent years. They have contributed to the $166 billion in foreign exchange reserves by mid-September 2006. Government receipts from privatization were about $3 billion in fiscal year 2003-04.

However, economic growth is constrained by inadequate infrastructure, a cumbersome bureaucracy, corruption, labor market rigidities, regulatory and foreign investment controls, the 'reservation' of key products for small-scale industries, and high fiscal deficits. The outlook for further trade liberalization is mixed. India eliminated quotas on 1,420 consumer imports in 2002 and has announced its intention to continue to lower customs duties. However, the tax structure is complex, with compounding effects of various taxes.

The United States is India's largest trading partner. Bilateral trade in 2005 was $26.8 billion. Principal U.S. exports are diagnostic or lab reagents, aircraft and parts, advanced machinery, cotton, fertilizers, ferrous waste/scrap metal, and computer hardware. Major U.S. imports from India include textiles and ready-made garments, Internet-enabled services, agricultural and related products, gems and jewelry, leather products, and chemicals.

The rapidly growing software sector is boosting service exports and modernizing India's economy. Revenues from the information technology (IT) industry reached a turnover of $23.6 billion in 2005-06. Software exports crossed $22 billion in FY2005-06. IT and business process outsourcing (BPO) exports are projected to grow at nearly 27-30% during 2006-07. Personal computer penetration is 14 per 1,000 persons. The cellular/mobile market surged to 140 million subscribers by November 2006. The country has 54 million cable TV customers.

The United States is India's largest investment partner, with a 13% share. India's total inflow of U.S. direct investment is estimated at more than $5 billion through 2005-06. Proposals for direct foreign investment are considered by the Foreign Investment Promotion Board and generally receive government approval. Automatic approvals are available for investments involving up to 100% foreign equity, depending on the kind of industry. Foreign investment is particularly sought after in power generation, telecommunications, ports, roads, petroleum exploration/processing, and mining.

India's external debt was $125 billion in 2005-06, up from $123 billion in 2004-05. Foreign assistance was approximately $3.8 billion in 2005-06, with the United States providing about $126 million in development assistance. The World Bank plans to double aid to India to almost $3 billion a year, with focus on infrastructure, education, health, and rural livelihoods.


Facts at a Glance: Geography - People - Government - Economy - Communications - Transportation - Military - Climate - Current Time - Ranking Positions - Indian Rupee Exchange Rates
Notes and Commentary: People - Economy - Government and Political Conditions - Historical Highlights - Foreign Relations - Relations with U.S.



Facts at a Glance
Geography
People
Government
Economy
Communications
Transportation
Military
Climate
Current Time
Ranking Positions
Indian Rupee Exchange Rates


Notes and Commentary
People
Economy
Government and Political Conditions
Historical Highlights
Foreign Relations
Relations with U.S.





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