Economy of India(By Arun Joshi,9888933043)

The economy of India is the twelfth largest in the world by market exchange rates and the fourth largest in the world by GDP, measured on a purchasing power parity (PPP) basis. The country was under socialist-based policies for an entire generation from the 1950s until the 1980s. The economy was characterized by extensive regulation, protectionism, and public ownership, leading to pervasive corruption and slow growth. Since 1991, continuing economic liberalization has moved the economy towards a market-based system.

Agriculture is the predominant occupation in India, accounting for about 60% of employment. The service sector makes up a further 28%, and industrial sector around 12%. One estimate says that only one in five job-seekers has had any sort of vocational training. The labor force totals half a billion workers. For output, the agricultural sector accounts for 17% of GDP; the service and industrial sectors make up 54% and 29% respectively. Major agricultural products include rice, wheat, oilseed, cotton, jute, tea, sugarcane, potatoes, cattle, water buffalo, sheep, goats, poultry and fish. Major industries include textiles, chemicals, food processing, steel, transportation equipment, cement, mining, petroleum, machinery and software design. In 2007, India's GDP was $1.237 trillion, which makes it the twelfth-largest economy in the worldor fourth largest by purchasing power adjusted exchange rates. India's nominal per capita income of $1043 is ranked 136th in the world. In the late 2000s, India's growth has averaged 7.5% a year, increases which will double the average income within a decade. Unemployment rate is 7% (2008 estimate).
Previously a closed economy, India's trade has grown fast. India currently accounts for 1.5% of World trade as of 2007 according to the WTO. According to the World Trade Statistics of the WTO in 2006, India's total merchandise trade (counting exports and imports) was valued at $294 billion in 2006 and India's services trade inclusive of export and import was $143 billion. Thus, India's global economic engagement in 2006 covering both merchandise and services trade was of the order of $437 billion, up by a record 72% from a level of $253 billion in 2004. India's trade has reached a still relatively moderate share 24% of GDP in 2006, up from 6% in 1985.
India's recent economic growth has widened economic inequality across the country. Despite sustained high economic growth rate, approximately 80% of its population lives on less than $2 a day (PPP), more than double the same poverty rate in China. Even though the arrival of Green Revolution brought end to famines in India, 40% of children under the age of three are underweight and a third of all men and women suffer from chronic energy deficiency.

Independence to 1991

Indian economic policy after independence was influenced by the colonial experience (which was seen by Indian leaders as exploitative in nature) and by those leaders' exposure to Fabian socialism. Policy tended towards protectionism, with a strong emphasis on import substitution, industrialization, state intervention in labor and financial markets, a large public sector, business regulation, and central planning. Five-Year Plans of India resembled central planning in the Soviet Union. Steel, mining, machine tools, water, telecommunications, insurance, and electrical plants, among other industries, were effectively nationalized in the mid-1950s. Elaborate licences, regulations and the accompanying red tape, commonly referred to as Licence Raj, were required to set up business in India between 1947 and 1990.

Jawaharlal Nehru, the first prime minister, along with the statistician Prasanta Chandra Mahalanobis, carried on by Indira Gandhi formulated and oversaw economic policy. They expected favorable outcomes from this strategy, because it involved both public and private sectors and was based on direct and indirect state intervention, rather than the more extreme Soviet-style central command system. The policy of concentrating simultaneously on capital- and technology-intensive heavy industry and subsidizing manual, low-skill cottage industries was criticized by economist Milton Friedman, who thought it would waste capital and labour, and retard the development of small manufacturers.

India's low average growth rate from 1947–80 was derisively referred to as the Hindu rate of growth, because of the unfavourable comparison with growth rates in other Asian countries, especially the "East Asian Tigers".

The Rockefeller Foundation's research in high-yielding varieties of seeds, their introduction after 1965 and the increased use of fertilizers and irrigation are known collectively as the Green Revolution, which provided the increase in production needed to make India self-sufficient in food grains, thus improving agriculture in India. Famine in India, once accepted as inevitable, has not returned since the introduction of Green Revolution crops and the reduction of cash-crops that dominated India during the British Raj.

The economic liberalization in India fix to ongoing reforms in India.

After Independence in 1947, India adhered to socialist policies. The extensive regulation was sarcastically dubbed as the "License Raj", while the slow growth rate was dubbed as the "Hindu rate of growth".

In the 1980s, the Prime Minister Rajiv Gandhi initiated some reforms. His government was blocked by politics. In 1991, after IMF had bailed out the bankrupt state, the government of P. V. Narasimha Rao and his finance minister Manmohan Singh started breakthrough reforms. The new policies included opening for international trade and investment, deregulation, initiation of privatization, tax reforms, and inflation-controlling measures. The overall direction of liberalisation has remained the same, irrespective of the ruling party, although no party has yet tried to take on powerful lobbies such as the trade unions and farmers, or contentious issues such as reforming labour laws and reducing agricultural subsidies.
The fruits of liberalization reached their peak in 2007, with India recording its highest GDP growth rate of 9%.With this; India became the second fastest growing major economy in the world, next only to China. An OECD report suggests that the recent high growth rates can double the average income in a decade. The Economist states that "in many ways India counts as one of liberalisation's greatest success stories".

India is still held back by many problems. McKinsey states that removing main obstacles "would free India’s economy to grow as fast as China’s, at 10 percent a year".The World Bank suggests that the most important priorities are public sector reform, infrastructure, agricultural and rural development, easing of labor regulations, reforms in lagging states, and HIV/AIDS. The remaining challenges are demonstrated by the Ease of Doing Business Index, which placed India on the 120th place in 2008, worse than any neighboring country.

Future predictions

In the revised 2007 figures, based on increased and sustaining growth, more inflows into foreign direct investment, Goldman Sachs predicts that "from 2007 to 2020, India’s GDP per capita in US$ terms will quadruple", and that the Indian economy will surpass the United States (in US$) by 2043. Despite high growth rate, the report stated that India would continue to remain a low-income country for several decades but can be a "motor for the world economy" if it fulfills its growth potential. Goldman Sachs has outlined 10 things that it needs to do in order to achieve its potential and grow 40 times by 2050. These are 1.improve governance 2.raise educational achievement 3.increase quality and quantity of universities 4.control inflation 5.introduce a credible fiscal policy 6.liberalize financial markets 7.increase trade with neighbours 8.increase agricultural productivity 9.improve infrastructure and 10.improve environmental quality.