India has Asia's third largest economy after China
and Japan. The country has an extensive industrial and
service sector, while more than half the population rely
on agriculture, often for their own use. The differences
are huge between those who have been part of India's
modernization and those who have not been reached by it.
One can hardly speak of a single Indian economy.
Economic growth in India during the 2000s and 2010s
was one of the fastest in the world. The country, among
other things, has its own nuclear power industry, is a
large arms manufacturer and builds its own spacecraft
and cars. In the IT industry, India has developed into
one of the major software manufacturers. The country's
tourism industry is also economically significant.
Major imports by India, covering a full list of top products imported by the country and trade value for each product category.
The development has benefited from good access to
well-educated manpower and extended telecommunications
and internet connections. Western countries have
increasingly placed services on cheaper India, and the
service sector is the industry that has grown the most;
it now accounts for more than half of the country's GDP.
At the same time, there are still obstacles in the
form of undeveloped infrastructure (roads, electricity
networks, etc.), rigid labor market legislation and
extensive corruption and bureaucracy.
In the economy, there are major regional differences:
in the state of Orissa, over half the population lives
in poverty, in Punjab only a few percent. The economic
gap is also deep between the city and the countryside.
In the big cities there is a rich elite and a fast
growing middle class. In the slums and in the
countryside there is still a terrible mass poverty.
However, the proportion of poor Indians has
decreased, from more than half of the population in the
early 1970s to about one fifth by the end of the 2010s.
The fastest decline has been in the last decade.
Abbreviationfinder.org: Check this abbreviation website to find three letter ISO codes for all countries in the world, including IND which represents the country of India.
Rapid growth, slow reforms
Economic development was for a long time entirely
state-controlled and until the 1980s the Indian economy
developed more slowly than most other developing
countries. When Oxford-educated economist Manmohan Singh
took over as finance minister in 1991, India was in a
difficult financial crisis. Singh (later prime minister
2004–2014) opened the country's economy to the outside
world and sold state-owned companies to attract foreign
investors and boost the economy.
Productivity increased during the 1990s when the
Indian companies faced foreign competition. Other
reforms went slowly, perhaps because powerful forces
within the large state bureaucracy and the business
community felt threatened and therefore thwarted them.
The privatization of state-owned enterprises went slower
than promised, and despite cut subsidies, huge sums
still went to unproductive state-owned companies.
The reforms also continued under the Hindu-dominated
right-wing government that took office in the spring of
1998. In general, reform policy has always had support
across party borders and implemented - albeit at a slow
pace - regardless of which party bloc has been in power.
The Congress-led government (2004–2014) saw poverty
reduction and distribution issues as particularly
important. Investments were made on primary health care,
basic education, as well as on increased employment and
improved living conditions in rural areas. During the
global financial crisis of 2008, the government embarked
on economic stimulus packages, which accelerated the
manufacturing industry and the service sector.
Already in 2010, the Indian economy grew rapidly
again. Only China's economy grew faster that year.
Agricultural production was high, vehicle sales
increased, as did lending in the banks. India's economy
got a headache; high inflation forced the central bank
to raise the policy rate six times during the year.
In 2012 and 2013, some slowdown occurred. Industrial
production slowed somewhat, foreign investment
decreased, trade deficit grew and the value of the
Indian rupee fell. The government again focused on
stimulus measures, including opening the Indian retail
trade for foreign investment.
Mixed result for Modi
When Narendra Modi and his business-friendly, Hindu
nationalist BJP won government power in the spring of
2014, everything from a million new jobs a month to
pledges against both corruption and black trade was
promised. A number of reforms were initiated at a rapid
pace. Some received praise, others criticized.
Most praised was Modi for a successful investment in
opening bank accounts (318 million accounts 2014–2018)
to Indian citizens and for the digitization of various
types of transfers in the community. The introduction of
a new tax system in 2017 that better links the states to
a single Indian economy also seems to have worked
relatively well. The system has also increased tax
revenue to the Treasury. The "Make in India" initiative,
which aims to create new jobs and high economic growth
by drawing foreign investment into the manufacturing
industry with the help of simplified rules for the
companies, has also had some success. According to the
UN agency UNCTAD, India 2017 was the world's third most
attractive country for foreign investment. Inflation was
kept in check during the term of office.
Other changes have been criticized. This applies not
least to the decision in November 2016 to scrap 86 per
cent of all banknotes on the Indian market at short
notice. It was an attempt to address crimes such as tax
evasion and money laundering, which was partly
successful, but the measure also affected poor Indians
with savings in cash (mainly peasants and people living
in the informal sector). In many cases, they lost their
assets because they had no bank account to deposit the
banknotes on. The promise of a million new jobs per
month was not fulfilled, which created frustration among
the more than one million young Indians who join the
country's workforce each month.
The rapid currency reform combined with falling
producer prices in agriculture made it difficult for
many farmers from 2017 to manage their supply. They
began to conduct mass demonstrations against economic
policy. When the states of Uttar Pradesh and Maharashtra
granted farmers amortization of debt in April and June
respectively, demands for the same increased in other
Growth is slowing down
At the beginning of the 2019 election year, the BJP
government made a series of pledges to poor rural
households - a large electoral group. A new
government-funded program was promised to cover
healthcare costs up to a certain limit of about 100
million poor households. Thousands of health clinics
will be built where the poor can get free medicines and
examinations. The subsidies to agriculture should
increase as the state buys more crops at a minimum price
than before. Tens of thousands of local marketplaces
will be renovated and money will be spent on new rural
road construction and basic education.
At the same time, it was clear that the Indian
economy was starting to slow down and that unemployment
had risen to record levels. After the election victory,
the Modi government took a series of measures to
stimulate the economy. It sought to attract new foreign
investment to the coal mines, the manufacturing
industry, parts of the retail trade and the digital
media market. The central bank granted the government
extra funding for the Treasury.
During the quarter July-September 2019, the growth
rate in the Indian economy was the lowest in over six
years - 4.5 percent. In the same quarter of 2018, growth
was 7.0 percent. This was the sixth consecutive quarter
as the growth rate slowed. The development posed a major
challenge to the Modi government whose promises of
millions of new jobs seemed to be becoming increasingly
difficult to fulfill. Finance Minister Sitharaman tried
to reverse the trend by easing restrictions on foreign
investment in key sectors, lowering corporate taxes and
carrying out more sales. The central bank of India cut
its key rate five times in 2019.
At the beginning of 2020, official statistics showed
that GDP growth in 2019 was the lowest since the 2008
financial crisis. The slowdown was partly due to a
decrease in foreign investment and a slowdown in the
manufacturing industry. In order to increase domestic
consumption and foreign investment willingness, the
government allowed a larger budget deficit than planned
for 2020; public costs were allowed to be higher than
planned and some taxes were lowered, for example for
low-income earners. Farmers received increased support
for investments in solar energy; the idea was that they
could sell electricity to the local electricity market.
Corona pandemic beats the economy
In May 2020, Prime Minister Modi presented an
economic stimulus package that represented 10 percent of
the country's GDP. The $ 266 billion that the package
consisted of would go to help employees and small and
medium-sized businesses hard hit by the corona pandemic.
No details of the stimulus package emerged, but Modi
stressed that India needs to become more self-sufficient
and that the Indians should buy locally produced goods
to support the country's businesses. In April, about 122
million Indians lost their jobs because of the shutdown
of the country, according to the Bombay-based think tank
Center for Monitoring Indian Economy.
About our sources
FACTS - FINANCE
GDP per person
US $ 2,016 (2018)
US $ 2,726,323 million (2018)
7.0 percent (2018)
Agriculture's share of GDP
14.5 percent (2018)
Manufacturing industry's share of GDP
15.0 percent (2018)
The service sector's share of GDP
49.0 percent (2018)
3.4 percent (2019)
Government debt's share of GDP
68.1 percent (2018)
US $ 513,209 M (2017)
US $ 332,087 million (2018)
US $ 518,779 million (2018)
- US $ 65 599 million (2018)
Commodity trade's share of GDP
31 percent (2018)
Main export goods
machinery, vehicles, iron and steel, chemicals, oil
products; pearls, gems and jewelery; clothing, fabrics
and sports articles; technologically advanced industrial
products (eg computer software)
Largest trading partner
USA, China, United Arab Emirates, Saudi Arabia