India was under social democratic-based policies from 1947 to 1991. The economy was characterised by extensive regulation, protectionism, public ownership, pervasive corruption and slow growth.[11][12][13] Since 1991, continuing economic liberalisation has moved the country toward a market-based economy.[11][12] A revival of economic reforms and better economic policy in first decade of the 21st century accelerated India's economic growth rate. In recent years, Indian cities have continued to liberalize business regulations.[6] By 2008, India had established itself as the world's second-fastest growing major economy.[14] However, as a result of the financial crisis of 2007–2010, coupled with a poor monsoon, India's gross domestic product (GDP) growth rate significantly slowed to 6.7% in 2008–09, but subsequently recovered to 7.2% in 2009–10, while the fiscal deficit rose from 5.9% to a high 6.5% during the same period.[15] India ranks 51th in the Global Competitiveness Report.[16]
India's large service industry accounts for 57.2% of the country's GDP while the industrial and agricultural sector contribute 28% and 14.6% respectively.[17] Agriculture is the predominant occupation in India, accounting for about 52% of employment. The service sector makes up a further 34%, and industrial sector around 14%.[18] The labour force totals half a billion workers. Major agricultural products include rice, wheat, oilseed, cotton, jute, tea, sugarcane, potatoes, cattle, water buffalo, sheep, goats, poultry and fish.[19] Major industries include telecommunications, textiles, chemicals, food processing, steel, transportation equipment, cement, mining, petroleum, machinery, information technology enabled services and pharmaceuticals.[19]
Previously a closed economy, India's trade has grown fast.[11] 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.[11]
|
|
[edit] History
Main articles: Economic history of India and Timeline of the economy of India
[edit] Pre-colonial period (up to 1757)
Maritime trade was carried out extensively between South India and southeast and West Asia from early times till around the fourteenth century AD. Both the Malabar and Coromandel Coasts were the sites of important trading centres from as early as the first century BC, used for import and export as well as transit points between the Mediterranean region and southeast Asia.[22] Over time, traders organised themselves into associations which received state patronage. However, state patronage for overseas trade came to an end by the thirteenth century AD, when it was largely taken over by the local Jewish and Muslim communities, initially on the Malabar and subsequently on the Coromandel coast.[23] Further north, the Saurashtra and Bengal coasts played an important role in maritime trade, and the Gangetic plains and the Indus valley housed several centres of river-borne commerce. Most overland trade was carried out via the Khyber Pass connecting the Punjab region with Afghanistan and onward to the Middle East and Central Asia.[24] Although many kingdoms and rulers issued coins, barter was prevalent. Villages paid a portion of their agricultural produce as revenue to the rulers, while its craftsmen received a part of the crops at harvest time for their services.[25]
Religion, especially Hinduism, and the caste and the joint family systems, played an influential role in shaping economic activities.[26] The caste system functioned much like medieval European guilds, ensuring the division of labour, providing for the training of apprentices and, in some cases, allowing manufacturers to achieve narrow specialization. For instance, in certain regions, producing each variety of cloth was the specialty of a particular sub-caste. Textiles such as muslin, Calicos, shawls, and agricultural products such as pepper, cinnamon, opium and indigo were exported to Europe, the Middle East and South East Asia in return for gold and silver.[27]
Assessment of India's pre-colonial economy is mostly qualitative, owing to the lack of quantitative information. The Mughal economy functioned on an elaborate system of coined currency, land revenue and trade. Gold, silver and copper coins were issued by the royal mints which functioned on the basis of free coinage.[28] The political stability and uniform revenue policy resulting from a centralised administration under the Mughals, coupled with a well-developed internal trade network, ensured that India, before the arrival of the British, was to a large extent economically unified, despite having a traditional agrarian economy with a dominant subsistence sector dependent on primitive technology.[29] After the decline of the Mughals, western, central and parts of south and north India were integrated and administered by the Maratha Empire. After the loss at the Third Battle of Panipat, the Maratha Empire disintegrated into several confederate states, and the resulting political instability and armed conflict severely affected economic life in several parts of the country, although this was compensated for to some extent by the localised prosperity in the new provincial kingdoms.[30] By the end of the eighteenth century, the British East India Company entered the Indian political theatre and established its dominance over other European powers. This marked a determinative shift in India's trade, and a less powerful impact on the rest of the economy.[31]
[edit] Colonial period (1773–1947)
There is no doubt that our grievances against the British Empire had a sound basis. As the painstaking statistical work of the Cambridge historian Angus Maddison has shown, India's share of world income collapsed from 22.6% in 1700, almost equal to Europe's share of 23.3% at that time, to as low as 3.8% in 1952. Indeed, at the beginning of the 20th Century, "the brightest jewel in the British Crown" was the poorest country in the world in terms of per capita income.Company rule in India brought a major change in the taxation and agricultural policies, which tended to promote commercialisation of agriculture with a focus on trade, resulting in decreased production of food crops, mass impoverishment and destitution of farmers, and in the short term, led to numerous famines.[33] The economic policies of the British Raj caused a severe decline in the handicrafts and handloom sectors, due to reduced demand and dipping employment.[34] After the removal of international restrictions by the Charter of 1813, Indian trade expanded substantially and over the long term, showed an upward trend.[35] The result was a significant transfer of capital from India to England, which, due to the colonial policies of the British, led to a massive drain of revenue instead of any systematic effort at modernisation of the domestic economy.[36]
The 1872 census revealed that 91.3% of the population of the region constituting present-day India resided in villages,[41] and urbanisation generally remained sluggish until the 1920s, due to the lack of industrialisation and absence of adequate transportation. Subsequently, the policy of discriminating protection, coupled with the second world war, saw the development and dispersal of industries, encouraging rural-urban migration, and in particular the large port cities of Bombay, Calcutta and Madras grew rapidly. Despite this, only one-sixth of India's population lived in cities by 1951.[42]
The impact of the British rule on India's economy is a controversial topic. Leaders of the Indian independence movement, and left-nationalist economic historians have blamed colonial rule for the dismal state of India's economy in its aftermath and that financial strength required for Industrial development in Europe was derived from the wealth taken from Colonies in Asia and Africa. At the same time right-wing historians have countered that India's low economic performance was due to various sectors being in a state of growth and decline due to changes brought in by colonialism and a world that was moving towards industrialization and economic integration.[43]
[edit] Pre-liberalisation period (1947–1991)
Jawaharlal Nehru, the first prime minister of India, along with the statistician Prasanta Chandra Mahalanobis, formulated and oversaw economic policy during the initial years of the country's existence. They expected favorable outcomes from their strategy, involving the rapid development of heavy industry by both public and private sectors, and based on direct and indirect state intervention, rather than the more extreme Soviet-style central command system.[47][48] The policy of concentrating simultaneously on capital- and technology-intensive heavy industry and subsidizing manual, low-skill cottage industries was criticised by economist Milton Friedman, who thought it would waste capital and labour, and retard the development of small manufacturers.[49] The rate of growth of the Indian economy in the first three decades after independence 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.[50][51]
Since 1965, the use of high-yielding varieties of seeds, increased fertilizers and improved irrigation facilities collectively contributed to the Green Revolution in India, which improved the condition of agriculture in India by increasing productivity of food as well as commercial crops, improving crop patterns and strengthening forward and backward linkages between agriculture and industry.[52] However, it has also been criticised as an unsustainable effort, resulting in the growth of capitalistic farming, ignoring institutional reforms and widening income disparities.[53]
[edit] Post-liberalisation period (since 1991)
Main articles: Economic liberalization in India and Economic development in India
In the late 70s, the government led by Morarji Desai
eased restrictions on capacity expansion for incumbents, removed price
controls and reduced corporate taxes and small scale industries are
created in large numbers. However the subsequent government policy of Fabian socialism hampered the benefits of the economy leading to high fiscal deficits and a worsening current account. The collapse of the Soviet Union, which was India's major trading partner, and the first Gulf War,
which caused a spike in oil prices, caused a major balance-of-payments
crisis for India, which found itself facing the prospect of defaulting
on its loans.[54] India asked for a $1.8 billion bailout loan from IMF, which in return demanded reforms.[55]In response, Prime Minister Narasimha Rao along with his finance minister Dr. Manmohan Singh initiated the economic liberalization of 1991. The reforms did away with the Licence Raj (investment, industrial and import licensing) and ended many public monopolies, allowing automatic approval of foreign direct investment in many sectors.[56] Since then, the overall direction of liberalisation has remained the same, irrespective of the ruling party, although no party has 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.[57] By the turn of the century, India had progressed towards a free-market economy, with a substantial reduction in state control of the economy and increased financial liberalisation.[58] This has been accompanied by increases in life expectancy, literacy rates and food security.[59]
While the credit rating of India was hit by its nuclear tests in 1998, it has been raised to investment level in 2007 by S&P and Moody's.[60] In 2003, Goldman Sachs predicted that India's GDP in current prices would overtake France and Italy by 2020, Germany, UK and Russia by 2025 and Japan by 2035. By 2035, it was projected to be the third largest economy of the world, behind US and China. India is often seen by most economists as a rising economic superpower and is believed to play a major role in the global economy in the 21st century.[61][62]
[edit] Sectors
[edit] Industry and services
See also: Information technology in India, Business process outsourcing in India, and Retailing in India
Economic reforms brought foreign competition, led to privatisation of certain public sector industries, opened up sectors hitherto reserved for the public sector and led to an expansion in the production of fast-moving consumer goods.[68] Post-liberalisation, the Indian private sector was faced with increasing domestic as well as foreign competition, including the threat of cheaper Chinese imports. It has since handled the change by squeezing costs, revamping management, and relying on cheap labour and new technology. However, this has also reduced employment generation even by smaller manufacturers who earlier relied on relatively labour-intensive processes.[69]
Textile manufacturing is the second largest source for employment after agriculture and accounts for 26% of manufacturing output.[70] Ludhiana produces 90% of woolens in India and is also known as the Manchester of India. Tirupur has gained universal recognition as the leading source of hosiery, knitted garments, casual wear and sportswear.[71] Dharavi slum in Mumbai has gained fame for leather products. Tata Motors' Nano attempts to be the world's cheapest car.[65]
India is fifteenth in services output. It provides employment to 23% of work force, and it is growing fast, growth rate 7.5% in 1991–2000 up from 4.5% in 1951–80. It has the largest share in the GDP, accounting for 55% in 2007 up from 15% in 1950.[18]
Business services (information technology, information technology enabled services, business process outsourcing) are among the fastest growing sectors contributing to one third of the total output of services in 2000. The growth in the IT sector is attributed to increased specialization, and an availability of a large pool of low cost, but highly skilled, educated and fluent English-speaking workers, on the supply side, matched on the demand side by an increased demand from foreign consumers interested in India's service exports, or those looking to outsource their operations. The share of India's IT industry to the country's GDP increased from 4.8 % in 2005–06 to 7% in 2008.[72][73] In 2009, seven Indian firms were listed among the top 15 technology outsourcing companies in the world.[74] In March 2009, annual revenues from outsourcing operations in India amounted to US$60 billion and this is expected to increase to US$225 billion by 2020.[75]
Organised retail such supermarkets accounts for 24% of the market as of 2008.[76] Regulations prevent most foreign investment in retailing. Moreover, over thirty regulations such as "signboard licences" and "anti-hoarding measures" may have to be complied before a store can open doors. There are taxes for moving goods to states, from states, and even within states.[76]
Tourism in India is relatively undeveloped, but growing at double digits. Some hospitals woo medical tourism.[77]
Mining forms an important segment of the Indian economy, with the country producing 79 different minerals (excluding fuel and atomic resources) in 2009–10, including iron ore, manganese, mica, bauxite, chromite, limestone, asbestos, fluorite, gypsum, ochre, phosphorite and silica sand.[78]
[edit] Agriculture
Main articles: Agriculture in India, Forestry in India, Animal husbandry in India, and Fishing in India
See also: Natural resources in India
India ranks second worldwide in farm output. Agriculture and allied sectors like forestry, logging and fishing
accounted for 15.7% of the GDP in 2009–10, employed 52.1% of the total
workforce, and despite a steady decline of its share in the GDP, is
still the largest economic sector and plays a significant role in the
overall socio-economic development of India.[81] Yields
per unit area of all crops have grown since 1950, due to the special
emphasis placed on agriculture in the five-year plans and steady
improvements in irrigation, technology, application of modern agricultural practices and provision of agricultural credit and subsidies since the Green Revolution in India.
However, international comparisons reveal the average yield in India is
generally 30% to 50% of the highest average yield in the world.[82]India receives an average annual rainfall of 1,208 millimetres (47.6 in) and a total annual precipitation of 4000 billion cubic metres, with the total utilisable water resources, including surface and groundwater, amounting to 1123 billion cubic metres.[83] 546,820 square kilometres (211,130 sq mi) of the land area, or about 39% of the total cultivated area, is irrigated.[84] India's inland water resources comprising rivers, canals, ponds and lakes and marine resources comprising the east and west coasts of the Indian ocean and other gulfs and bays provide employment to nearly 6 million people in the fisheries sector. In 2008, India had the world's third largest fishing industry.[85]
India is the largest producer in the world of milk, cashew nuts, coconuts, tea, ginger, turmeric and black pepper.[86] It also has the world's second largest cattle population with 175 million heads in 2008.[87] It is the second largest producer of rice, wheat, sugarcane, cotton and groundnuts, as well as the second largest fruit and vegetable producer, accounting for 10.9% and 8.6% of the world fruit and vegetable production respectively.[87] India is also the second largest producer and the largest consumer of silk in the world, producing 77,000 million tons in 2005.[88]
[edit] Banking and finance
Main article: Finance in India
See also: Banking in India and Insurance in India
The Indian money market is classified into the organised sector (comprising private, public and foreign owned commercial banks and cooperative banks, together known as scheduled banks); and the unorganised sector (comprising individual or family owned indigenous bankers or money lenders and non-banking financial companies (NBFCs)).[89] The unorganised sector and microcredit
are still preferred over traditional banks in rural and sub-urban
areas, especially for non-productive purposes, like ceremonies and short
duration loans.[90]Prime Minister Indira Gandhi nationalised 14 banks in 1969, followed by six others in 1980, and made it mandatory for banks to provide 40% of their net credit to priority sectors like agriculture, small-scale industry, retail trade, small businesses, etc. to ensure that the banks fulfill their social and developmental goals. Since then, the number of bank branches has increased from 8,260 in 1969 to 72,170 in 2007 and the population covered by a branch decreased from 63,800 to 15,000 during the same period. The total deposits increased from
5,910 crore (US$1.28 billion) in 1970–71 to 3,830,922 crore (US$831.31 billion)
in 2008–09. Despite an increase of rural branches, from 1,860 or 22% of
the total number of branches in 1969 to 30,590 or 42% in 2007, only
32,270 out of 500,000 villages are covered by a scheduled bank.[91][92]The public sector banks hold over 75% of total assets of the banking industry, with the private and foreign banks holding 18.2% and 6.5% respectively.[93] Since liberalisation, the government has approved significant banking reforms. While some of these relate to nationalised banks (like encouraging mergers, reducing government interference and increasing profitability and competitiveness), other reforms have opened up the banking and insurance sectors to private and foreign players.[18][94]
More than half of personal savings are invested in physical assets such as land, houses, cattle, and gold.[95] India's gross domestic saving in 2006–07 as a percentage of GDP stood at a high 32.7%.[96]
[edit] Energy and power
Main article: Energy policy of India
[edit] External trade and investment
Further information: Globalisation in India
[edit] Global trade relations
Since liberalization, the value of India's international trade has increased sharply.[109] India's major trading partners are the European Union, China, the United States and the United Arab Emirates.[110] The exports during April 2007 were $12.31 billion up by 16% and import were $17.68 billion with an increase of 18.06% over the previous year.[111] In 2006–07, major export commodities included engineering goods, petroleum products, chemicals and pharmaceuticals, gems and jewellery, textiles and garments, agricultural products, iron ore and other minerals. Major import commodities included crude oil and related products, machinery, electronic goods, gold and silver.[112] Its September 2010 exports were reported to have increased 23% year-on-year to US $18.02bn, while its imports were up 26.1% at $27.14bn. At US$13.06bn August's trade gap was the highest in 23 months but the economy is well on the road to cross $200 billion mark in exports for the financial year 2010–11.[113]
[edit] Balance of payments
Due to the global late-2000s recession, both Indian exports and imports declined by 29.2% and 39.2% respectively in June 2009.[120] The steep decline was because countries hit hardest by the global recession, such as United States and members of the European Union, account for more than 60% of Indian exports.[121] However, since the decline in imports was much sharper compared to the decline in exports, India's trade deficit reduced to
25,250 crore (US$5.48 billion).[120]India's reliance on external assistance and commercial borrowings has decreased since 1991–92, and since 2002–03, it has gradually been repaying these debts. Declining interest rates and reduced borrowings decreased India's debt service ratio to 4.5% in 2007.[122] In India, External Commercial Borrowings (ECBs) are being permitted by the Government for providing an additional source of funds to Indian corporates. The Ministry of Finance monitors and regulates these borrowings (ECBs) through ECB policy guidelines.[123] India's foreign exchange reserves have steadily risen from $5.8 billion in March 1991 to $283.5 billion in December 2009. [124]
[edit] Foreign direct investment in India
| Rank | Country | Inflows (million USD) |
Inflows (%) |
|---|---|---|---|
| 1 | Mauritius | 50,164 | 42.00 |
| 2 | Singapore | 11,275 | 9.00 |
| 3 | USA | 8,914 | 7.00 |
| 4 | UK | 6,158 | 5.00 |
| 5 | Netherlands | 4,968 | 4.00 |
During 2000–10, the country attracted $178 billion as FDI.[128] The inordinately high investment from Mauritius is due to routing of international funds through the country given significant tax advantages; double taxation is avoided due to a tax treaty between India and Mauritius, and Mauritius is a capital gains tax haven, effectively creating a zero-taxation FDI channel.[129]
India's recently liberalised FDI policy (2005) allows up to a 100% FDI stake in ventures. Industrial policy reforms have substantially reduced industrial licensing requirements, removed restrictions on expansion and facilitated easy access to foreign technology and foreign direct investment FDI. The upward moving growth curve of the real-estate sector owes some credit to a booming economy and liberalised FDI regime. In March 2005, the government amended the rules to allow 100% FDI in the construction sector, including built-up infrastructure and construction development projects comprising housing, commercial premises, hospitals, educational institutions, recreational facilities, and city- and regional-level infrastructure.[130]
A number of changes were approved on the FDI policy to remove the caps in most sectors. Fields which require relaxation in FDI restrictions include civil aviation, construction development, industrial parks, petroleum and natural gas, commodity exchanges, credit-information services and mining. But this still leaves an unfinished agenda of permitting greater foreign investment in politically sensitive areas such as insurance and retailing. The total FDI equity inflow into India in 2008–09 stood at
122,919 crore (US$26.67 billion), a growth of 25% in rupee terms over the previous period.[131][edit] Currency
Main articles: Indian rupee and Reserve Bank of India
The Indian rupee is the only legal tender in India. The exchange rate as on 23 March 2010 is 45.40 INR to the USD,[132] 61.45 to a EUR, and 68.19 to a GBP. The Indian rupee is accepted as legal tender in the neighbouring Nepal and Bhutan, both of which peg their currency to that of the Indian rupee. The rupee is divided into 100 paise.
The highest-denomination banknote is the 1,000 rupee note; the
lowest-denomination coin in circulation is the 25 paise coin (it earlier
had 1, 2, 5, 10 and 20 paise coins which have been discontinued).[133] India's monetary system is managed by the Reserve Bank of India (RBI), the country's central bank.[134]
Established on 1 April 1935 and nationalised in 1949, the RBI serves as
the nation's monetary authority, regulator and supervisor of the
monetary system, banker to the government, custodian of foreign exchange
reserves, and as an issuer of currency. It is governed by a central
board of directors, headed by a governor who is appointed by the
Government of India.[135]The rupee was linked to the British pound from 1927–1946 and then the U.S. dollar till 1975 through a fixed exchange rate. It was devalued in September 1975 and the system of fixed par rate was replaced with a basket of four major international currencies — the British pound, the U.S. dollar, the Japanese yen and the Deutsche mark.[136] Since 2003, the rupee has been steadily appreciating against the U.S. dollar.[137] In 2009, a rising rupee prompted the Government of India to purchase 200 tons of gold for $6.7 billion from the IMF.[138]
[edit] Income and consumption
Main article: Income in India
See also: Poverty in India
Housing is modest. According to Times of India, "a majority of Indians have per capita space equivalent to or less than a 10 feet x 10 feet room for their living, sleeping, cooking, washing and toilet needs." and "one in every three urban Indians lives in homes too cramped to exceed even the minimum requirements of a prison cell in the US."[145] The average is 103 sq ft (9.6 m2) per person in rural areas and 117 sq ft (10.9 m2) per person in urban areas.[145]
Around half of Indian children are malnourished. The proportion of underweight children is nearly double that of Sub-Saharan Africa.[146][147] However, India has not had famines since the Green Revolution in the early 1970s. A 2007 report by the state-run National Commission for Enterprises in the Unorganised Sector (NCEUS) found that 65% of Indians, or 750 million people, lived on less than
20 (US$0.43) per day,[148] with most working in "informal labour sector with no job or social security, living in abject poverty."[149]Since the early 1950s, successive governments have implemented various schemes, under planning, to alleviate poverty, that have met with partial success. All these programmes have relied upon the strategies of the Food for work programme and National Rural Employment Programme of the 1980s, which attempted to use the unemployed to generate productive assets and build rural infrastructure.[150] In August 2005, the Indian parliament passed the Rural Employment Guarantee Bill, the largest programme of this type in terms of cost and coverage, which promises 100 days of minimum wage employment to every rural household in all the India's 600 districts. The question of whether economic reforms have reduced poverty or not has fuelled debates without generating any clear cut answers and has also put political pressure on further economic reforms, especially those involving the downsizing of labour and cutting agricultural subsidies.[151][152] Recent statistics in 2010 point out that the number of high income households has crossed lower income households.[153]
[edit] Employment
See also: Indian labour law
Agricultural and allied sectors accounted for about 52.1% of the total workforce in 2009–10.[81]
While agriculture has faced stagnation in growth, services have seen a
steady growth. Of the total workforce, 8% is in the organised sector,
two-thirds of which are in the public sector. The NSSO survey estimated
that in 1999–2000, 106 million, nearly 10% of the population were
unemployed and the overall unemployment rate was 7.3%, with rural areas
doing marginally better (7.2%) than urban areas (7.7%). India's labour
force is growing by 2.5% annually, but employment only at 2.3% a year.[154]Official unemployment exceeds 9%. Regulation and other obstacles have discouraged the emergence of formal businesses and jobs. Almost 30% of workers are casual workers who work only when they are able to get jobs and remain unpaid for the rest of the time.[154] Only 10% of the workforce is in regular employment.[154] India's labour regulations are heavy even by developing country standards and analysts have urged the government to abolish them.[11][155]
Unemployment in India is characterised by chronic or disguised unemployment. Government schemes that target eradication of both poverty and unemployment (which in recent decades has sent millions of poor and unskilled people into urban areas in search of livelihoods) attempt to solve the problem, by providing financial assistance for setting up businesses, skill honing, setting up public sector enterprises, reservations in governments, etc. The decline in organised employment due to the decreased role of the public sector after liberalization has further underlined the need for focusing on better education and has also put political pressure on further reforms.[156] [157]
Child labour in India is a complex problem that is basically rooted in poverty. The Indian government is implementing the world's largest child labour elimination program, with primary education targeted for ~250 million. Numerous non-governmental and voluntary organizations are also involved. Special investigation cells have been set up in states to enforce existing laws banning employment of children (under 14) in hazardous industries. The allocation of the Government of India for the eradication of child labour was $10 million in 1995–96 and $16 million in 1996–97. The allocation for 2007 is $21 million.[158]
In 2006, remittances from Indian migrants overseas made up $27 billion or about 3% of India's GDP.[159]
[edit] Economic trends
[edit] Issues
[edit] Agriculture
Main article: Agriculture in India
Slow agricultural growth is a concern for policymakers as some two-thirds of India’s people depend on rural employment for a living. Current agricultural practices are neither economically nor environmentally sustainable and India's yields for many agricultural commodities are low. Poorly maintained irrigation systems and almost universal lack of good extension services are among the factors responsible. Farmers' access to markets is hampered by poor roads, rudimentary market infrastructure, and excessive regulation.India's population is growing faster than its ability to produce rice and wheat.[162] The low productivity in India is a result of several factors. According to the World Bank, India's large agricultural subsidies are hampering productivity-enhancing investment. While overregulation of agriculture has increased costs, price risks and uncertainty, governmental intervention in labour, land, and credit markets are hurting the market. Infrastructure and services are inadequate.[163] Further, the average size of land holdings is very small, with 70% of holdings being less than one hectare in size.[164] The partial failure of land reforms in many states, exacerbated by poorly maintained or non-existent land records, has resulted in sharecropping with cultivators lacking ownership rights, and consequently low productivity of labour.[165] Adoption of modern agricultural practices and use of technology is inadequate, hampered by ignorance of such practices, high costs, illiteracy, slow progress in implementing land reforms, inadequate or inefficient finance and marketing services for farm produce and impracticality in the case of small land holdings. The allocation of water is inefficient, unsustainable and inequitable. The irrigation infrastructure is deteriorating.[163] Irrigation facilities are inadequate, as revealed by the fact that only 39% of the total cultivable land was irrigated as of 2010,[84] resulting in farmers still being dependent on rainfall, specifically the monsoon season, which is often inconsistent and unevenly distributed across the country.[166]
– World Bank: "India Country Overview 2008"[161]
[edit] Corruption
Main article: Corruption in India
Corruption has been one of the pervasive problems affecting India. The economic reforms of 1991 reduced the red tape, bureaucracy and the Licence Raj that were largely blamed for the institutionalised corruption and inefficiency.[167] Yet, a 2005 study by Transparency International
(TI) found that more than half of those surveyed had firsthand
experience of paying bribe or peddling influence to get a job done in a
public office.[168]The Right to Information Act (2005) and equivalent acts in the Indian states, that require government officials to furnish information requested by citizens or face punitive action, computerisation of services and various central and state government acts that established vigilance commissions have considerably reduced corruption or at least have opened up avenues to redress grievances.[168] The 2010 report by TI ranks India at 87th place and states that significant setbacks were made by India in reducing corruption.[169]
[edit] Education
Main article: Education in India
India has made huge progress in terms of increasing primary education attendance rate and expanding literacy to approximately two thirds of the population.[174] The right to education at elementary level has been made one of the fundamental rights under the eighty-sixth Amendment of 2002, and legislation has been enacted to further the objective of providing free education to all children.[175] However, the literacy rate of 65% is still lower than the worldwide average and the country suffers from a high dropout rate.[176][edit] Infrastructure
See also: Transport in India, Indian Road Network, Ports in India, Electricity sector in India, States of India by installed power capacity, Water supply and sanitation in India, and Communications in India
Some 600 million Indians have no means of electricity at all.[181] While 80% of Indian villages have at least an electricity line, just 44% of rural households have access to electricity.[182] Some half of the electricity is stolen, compared with 3% in China. The stolen electricity amounts to 1.5% of GDP.[182][183] Almost all of the electricity in India is produced by the public sector. Power outages are common.[181] Many buy their own power generators to ensure electricity supply. As of 2005 the electricity production was at 661.6 billion kWh with oil production standing at 785,000 bbl/d (124,800 m3/d). In 2007, electricity demand exceeded supply by 15%.[181] Multi Commodity Exchange has tried to get a permit to offer electricity future markets.[184] Water supply is a major problem even in urban India, with most cities getting water for few hours during the day and in some cases, after several days.[185]
India has the world's third largest road network in the world.[186] Container traffic is growing at 15% a year.[187] Internet use is rare; there were only 7.57 million broadband lines in India in November 2009, however it is still growing at slower rate and is expected to boom after the launch of 3G and wimax services.[188]
[edit] Labour laws
Main article: Indian labour laws
India’s labor regulations — among the most restrictive and complex in the world — have constrained the growth of the formal manufacturing sector where these laws have their widest application. Better designed labor regulations can attract more labor- intensive investment and create jobs for India’s unemployed millions and those trapped in poor quality jobs. Given the country’s momentum of growth, the window of opportunity must not be lost for improving the job prospects for the 80 million new entrants who are expected to join the work force over the next decade.India's restrictive labour regulations hamper the large-scale creation of formal industrial jobs.[11][176][189]
– World Bank: India Country Overview 2008.[161]
India ranked 133th on the Ease of Doing Business Index 2010, behind countries such as China (89th), Pakistan (85th), and Nigeria (125th). The Constitution provides equality of opportunity and protection against child labour, slavery, forced labour etc. in form of fundamental rights, but the implementation of provisions cited is a matter of concern.[190]
[edit] Economic disparities
Main articles: Economic disparities in India and Poverty in India
Lagging states need to bring more jobs to their people by creating an attractive investment destination. Reforming cumbersome regulatory procedures, improving rural connectivity, establishing law and order, creating a stable platform for natural resource investment that balances business interests with social concerns, and providing rural finance are important.
– World Bank: India Country Overview 2008[161]
Between 1999 and 2008, the annualised growth rates for Maharashtra (9%),[194] Gujarat (8.8%), Haryana (8.7%), or Delhi (7.4%) were much higher than for Bihar (5.1%), Uttar Pradesh (4.4%), or Madhya Pradesh (3.5%).[195] However, In 2009–10, Bihar witnessed a growth of about 12.6%, and ended up becoming the 'fastest growing state' , followed by Gujarat with a growth of 11.3%.
Poverty rates in rural Orissa (43%) and rural Bihar (40%) are some of the worst in the world.[196] On the other hand, rural Haryana (5.7%) and rural Punjab (2.4%) compare well with middle-income countries.[196]
The five-year plans have attempted to reduce regional disparities by encouraging industrial development in the interior regions, but industries still tend to concentrate around urban areas and port cities[197] After liberalization, the more advanced states are better placed to benefit from them, with infrastructure like well developed ports, urbanisation and an educated and skilled workforce which attract manufacturing and service sectors. The union and state governments of backward regions are trying to reduce the disparities by offering tax holidays, cheap land, etc., and focusing more on sectors like tourism, which although being geographically and historically determined, can become a source of growth and is faster to develop than other sectors.
No comments:
Post a Comment