Economy

The Bombay Stock Exchange, in Mumbai, is Asia's oldest

and India's largest stock exchange by market capitalisation

According to the International Monetary Fund, India's nominal GDP stood at US$1.43 trillion, which makes it the eleventh-largest economy in the world,[133] corresponding to a per capita income of US$1,000.[134] If purchasing power parity (PPP) is taken into account, India's economy is the fourth largest in the world at US$4.001 trillion.[135] The country ranks 142th in nominal GDP per capita and 127th in GDP per capita at PPP.[133] With an average annual GDP growth rate of 5.8% for the past two decades, India is one of the fastest growing economies in the world.[136]

Before 1991, the Indian government followed protectionist and socialist-inspired policies because of which the Indian economy was largely closed to the outside world and suffered from extensive state intervention and regulation.[137] After an acute balance of payments crisis, the nation liberalised its economy and has since moved towards a free-market economy.[138][139] Since then, the emphasis has been to use foreign trade and investment as integral parts of India's economy.[140] Currently, India's economic system is portrayed as a capitalist model with the influx of private enterprise.[139]

India has the world's second largest labour force, with 467 million people.[141] In terms of output, the agricultural sector accounts for 28% of GDP; the service and industrial sectors make up 54% and 18% respectively. Major agricultural products include rice, wheat, oilseed, cotton, jute, tea, sugarcane, potatoes.[102] Major industries include textiles, telecommunications, chemicals, food processing, steel, transport equipment, cement, mining, petroleum, machinery and software.[102] India's external trade has reached a relatively moderate share of 24% of GDP in 2006, up from 6% in 1985.[138] In 2008, India's share of world trade was about 1.68%;[142] in 2009, it was the world's fifteenth largest importer and eighteenth largest exporter.[143] Major exports include petroleum products, textile goods, gems and jewelry, software, engineering goods, chemicals, and leather manufactures.[102] Major imports include crude oil, machinery, gems, fertiliser, chemicals.[102]

During the late 2000s, India's economic growth averaged 7.5% a year.[138] Over the past decade, hourly wage rates in India have more than doubled.[146] According to a 2007 McKinsey Global Institute report, since 1985, India's robust economic growth has shifted 431 million Indians out of poverty and by 2030, India's middle class population will rise to more than 580 million people.[147] India ranks 51st in the Global Competitiveness Report and if diversified, it ranked 16th in financial market sophistication, 24th in banking sector, 27th in business sophistication and 30th in innovation; ahead of several advanced economies.[148] Seven of the world's top 15 technology outsourcing companies are based in India and the country is viewed as the second most favourable outsourcing destination after the United States.[149] India's consumer market is currently the world's thirteenth largest and is expected to become the fifth largest by 2030.[147] India has the world's fastest growing telecommunication industry, adding about 10 million subscribers during 2008–09 period.[150] The country has the world's second fastest growing automobile industry, with domestic sales increasing by 26% during the 2009–10 period[151] and exports increasing by 36% during the 2008–09 period.[152]

Despite India's impressive economic growth over recent decades, the country continues to face various socio-economic challenges. Though the percentage of people living below the World Bank's international poverty line of $1.25/day decreased from 60% in 1981 to 42% in 2005,[153] the country still contains the largest concentration of poor people in the world.[154] Since 1991, inter-state economic inequality in India has consistently grown; the per capita net state domestic product of India's richest states is about 3.2 times that of the poorest states.[155] Perception about corruption in India has also increased significantly[156] and according to one estimate, since independence India has lost US$462 billion in illegal capital flows.[157] Half of the children in India are underweight[158] and about 46% of Indian children under the age of three suffer from malnutrition.[154]

Tata Nano, the world's cheapest car. India's
annual car exports have surged fivefold in the past five years

According to a 2011 PwC report, in terms of PPP, India's GDP will overtake that of Japan in 2011 and by 2045, India's GDP will surpass that of the United States.[159] Additionally, over the next four decades, India's average annual economic growth rate is expected to stand at about 8% and therefore, it has the potential to be the world's fastest growing major economy over the period to 2050.[159] The report also highlighted some of the key factors behind India's high economic growth rate — young and rapidly growing working age population; growth of manufacturing sector due to strong engineering skills and rising levels of education; and sustained growth of consumer market due to rapidly growing middle class population.[159] However, the World Bank suggests that for India to achieve its economic potential, it must continue to focus on public sector reform, transport infrastructure, agricultural and rural development, removal of labour regulations, education, energy security, and public health and nutrition.[160]