For most of its post-independence history, India adhered to a quasi-socialist approach with strict government control over private sector participation, foreign trade, and foreign direct investment. However, since 1991, India has gradually opened up its markets through economic reforms and reduced government controls on foreign trade and investment. Foreign exchange reserves have risen from US$5.8 billion in March 1991 to US$308 billion on 4 July 2008, while federal and state budget deficits have decreased. Privatization of publicly-owned companies and the opening of certain sectors to private and foreign participation has continued amid political debate. India’s GDP in terms of USD exchange-rate is US$1.089 trillion. When measured in terms of purchasing power parity (PPP), India has the world’s fourth largest GDP at US$4.726 trillion. India’s per capita income (nominal) is US$977, while its per capita (PPP) is US$2700.
With an average annual GDP growth rate of 5.5% for the past two decades, the economy is among the fastest growing in the world. India has the world’s second largest labour force, with 516.3 million people, 60% of whom are employed in agriculture and related industries; 28% in services and related industries; and 12% in industry. Major agricultural crops include rice, wheat, oilseed, cotton, jute, tea, sugarcane, and potatoes. The agricultural sector accounts for 28% of GDP; the service and industrial sectors make up 54% and 18% respectively. Major industries include automobiles, cement, chemicals, consumer electronics, food processing, machinery, mining, petroleum, pharmaceuticals, steel, transportation equipment, and textiles. Along with India’s fast economic growth comes its growing demand for energy. According to the Energy Information Administration, India is the sixth largest consumer of oil and third largest consumer of coal.
Although the Indian economy has grown steadily over the last two decades; its growth has been uneven when comparing different social groups, economic groups, geographic regions, and rural and urban areas. Income inequality in India is relatively small (Gini coefficient: 36.8 in year 2004), though it has been increasing of late. Wealth distribution in India is fairly uneven, with the top 10% of income groups earning 33% of the income. Despite significant economic progress, a quarter of the nation’s population earns less than the government-specified poverty threshold of $0.40 per day. In 2004–2005, 27.5% of the population was living below the poverty line.
More recently, India has capitalised on its large pool of educated, English-speaking people, and trained professionals to become an important outsourcing destination for multinational corporations and a popular destination for medical tourism. India has also become a major exporter of software as well as financial, research, and technological services. Its natural resources include arable land, bauxite, chromite, coal, diamonds, iron ore, limestone, manganese, mica, natural gas,
In 2007, estimated exports stood at US$140 billion and imports were around US$224.9 billion. Textiles, jewellery, engineering goods and software are major export commodities. While crude oil, machineries, fertilizers, and chemicals are major imports. India’s most important trading partners are the United States, the European Union, and China.