This essay concentrates on the economic situation prevailing in India.
In the later half of the twentieth century, after its independence, India has made remarkable progress in industrial, academic, medical, agriculture and the IT sector. India, with a population of over 1.095 billion which makes it the second most populated country on this world,(demographics, economy of India) with a vibrant economy, a very vast middle class having strong purchasing power, coupled with Government policies which are slowly shifting from a very closed protected model to opening for foreign investors, must be an ideal choice for anybody who is looking for study of an economy outside the USA.
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This essay briefly describes the various aspects of the Indian economy.
The Indian Economy
By and large the Indian economy can be divided into three phases, the pre- colonial, the colonial and the post independence. The pre-colonial era, deals with the economy before the British rule started in the 17th century. The colonial economy is classified as the economic situation during the British regime in India, and the post colonial era starts from 1947, when India gained its independence.(History, economy of India) This essay deals with the economy after 1947, especially after the 1990s.
The economy of India is the third largest in the world, as measured by the purchasing power parity, with a gross domestic product of US $ 3.611 trillion. It is the second fastest growing major economy in the world, with a GDP growth of 9.2 percent, at the end of the second quarter of the year 2006-2007. Due to India’s huge population , the per capita income is $ 3200 at PPP or $ 714 at nominal.
The economy is diverse and ps from agriculture, handicrafts, textiles, manufacturing and a wide range of services. Two thirds of the Indian work-force is still earning its livelihood through agriculture, services is the fastest developing sector and is playing an increasingly powerful role in the economy.
India took the route of socialist economy, after its independence. There was strict government control over the private sector participation, foreign trade and foreign direct investment. Since early 1990s, the government controls have been reduced as a part of the economic reforms, and privatization of public ventures has been initiated. India currently faces the challenge of huge population, social and economic inequality.
The most significant achievement of the Indian economy in the post independence era is its becoming a software giant and a most favored destination for out-sourcing from the USA and European countries. This has been possible, partly due to the natural forces like its geographic position and partly due to the five year plans of the Indian Government in the post independence years, which laid substantial stress on technical and professional education along with the conventional branches of education.
A night in the USA coincides exactly with a day in India. So, a medical institution can pass over the cases for medical transcription of a given day to its contractor in India when the office closes, and receive the transcribed file, when the office opens next morning. This is combined with a very well qualified, huge, young work force, which is perhaps more fluent in English than their counterparts in UK or USA. As a result of the British legacy, India already had sufficient number of missionary schools which trained the new generation of small Indian children in English as a medium. Most important of all, the five year plans of the Indian Government in the post independence era, laid more stress on technical and professional education. These efforts saw the birth and blossoming of many medical, engineering, technology, management and design institutes in India, and producing a very high quality of technically qualified work force. One more reason is that such highly qualified work force is still cheaper to the companies in
Europe and the USA, when compared to the actual cost in their country. A mix of all these reasons have enabled India to emerge as an undisputed software giant and the most favored destination for outsourcing.
During the freedom struggle, from 1915 to 1947, India was rightly perceived as an agrarian country, and the concept of cottage industry which would benefit thesmallest man in the remotest corner of the nation, was highly advocated by Mahatma Gandhiji. His ideals were soon forgotten and a socialist model with huge public and private sector undertakings, with direct and indirect control of the Government was established. (post independence, economy of India)
The character of the Indian economy is slowly but surely changing from a socialist model to a capitalist model. 1980s saw the first signs when Indira Gandhi nationalized many private sector banks. This pro-business move continued and in 1991, the Government opened its gates for foreign investments and participation with reduced Government interventions. Since then, India has become a favorite destination for many major multinationals like Macdonalds, Google and Microsoft.
Poverty is the major problem faced by the Government. The recent economic reforms have helped the middle and the upper class of India. A good amount of its population still lives under the poverty line. Since independence, many successive governments have implemented various schemes to deal with this problem, but met with partial or no success. The food for work and National Rural Employment Program of 1980s aimed at using the unemployed to generate productive assets and build rural infra structure. In August 2005, The Rural Employment Guarantee bill was passed, which assured a minimum wage of 100 days in a year to every rural household in 200 out of 600 districts of India. Whether any of the steps taken by the Government have resulted in decreasing poverty is a matter of severe debate, but there are political pressures on further economic reforms, especially related to downsizing of labor and cutting agricultural subsidies. ( poverty, socio-economic characteristics)
India and the world trade
India is gifted with many natural resources, due to its vast land and sea territory. This, coupled with the monsoon type climatic zone, enables it to be a land of abundance.
Till 1991, India was largely a closed economy, to protect the fledging economy and achieve self-reliance. Foreign trade and investment was subject to many government restrictions. These restrictions averaged annually to $ 200 million only. India is a founder member of GATT and WTO. It is active in effectively presenting the case of the developing nations before WTO. For instance, it has continued its opposition to issues like labor and environment, and other non-tariff barriers in WTO policies. (global trade relations, economy of India)
Indian exports and imports
During the year 2005, Indian exports were $76.23 billion and the major goods exported were textiles, gems and jewellery, engineering , chemicals and leather goods. Tea, jute and cotton form the backbone of Indian exports. The maincountries to which Indian goods are exported are, USA, China, UAE, UK and Hongkong.
During the same year, India imported crude oil, machinery, gems, fertilizer and chemicals, from countries like China, USA, Belgium, Singapore, Australia, and Germany. The total value of imports was $ 113.1 billion.(trading partners, economy of India). India’s global trade has gone up to $ 185 billion. (Financial Express).
One of the major changes that the Indian economy will undergo in the next 5 years or so, is that the foreign multi-nationals may be allowed to have an access to the gigantic retail sector of India, which is ever growing, because the population is ever growing. Wal-mart does not exist anywhere in India in 2006 but in 2010, major Indian urban centers may have wal-mart outlets !!!
Impact of IT
The advent of IT has had a very major impact on India’s role in the world trade. In fact, one of the major achievements of Indian economy is that it has succeeded in becoming an IT giant, directly competing with USA. India’s software and BPO related earnings were, $ 17.2 billion, an upward jump of 34 percent, as on March 2005. ( Outsourcing boom in India)
India is a fast growing economy with a very huge purchase power of the ever growing middle class. The Government policies which were closed towards globalization and international participation, have now started changing, and since 1991, when India opened its gates to foreigners, many companies have already started their operations in India.
- Demographics, history, post-independence, poverty, global trade relations, and trading partners, Economy of India, Wikipedia the free encyclopedia, 1-12- 2006, Retrieved on 6-12-2006 < http://en.wikipedia.org/wiki/ Economy_of_India >
- Financial express, India is rapidly integrating with world trade, Financial Express, 9-4-2005, Retrieved on 6-12-06 < http://www.financialexpress.com/fe_full_story.php?contact_id=87419>
- Outsourcing boom in India, India daily. 2-06-06, Retrieved on 6-12-06 < http://www.indiadaily.com/editorial/3003.asp>
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