The economy of India is the eleventh largest economy in the world by nominal GDP and the fourth largest by purchasing power parity (PPP). Following strong economic reforms from the socialist inspired economy of a post-independence Indian nation, the country began to develop a fast-paced economic growth, as free market principles were initiated in 1990 for international competition and foreign investment. India is an emerging economic power with a very large pool of human and natural resources, and a growing large pool of skilled professionals. Economists predict that by 2020, India will be among the leading economies of the world.
India, an emerging economy, has witnessed unprecedented levels of economic expansion, along with countries such as China, Russia, Mexico and Brazil. India, being a cost effective and labor intensive economy, has benefited immensely from outsourcing of work from developed countries, and a strong manufacturing and export oriented industrial framework. As the economic pace is picking up, global commodity prices have staged a comeback from their lows and global trade has also seen reasonably healthy growth over the last two years. Economic Prospects for 2010
The global economy seems to be recovering after the recent economic shock. The Indian economy, however, was hit in the latter part of the global recession and the real economic growth has witnessed a sharp fall, followed by lower exports, lower capital outflow and corporate restructuring. The global economies are expected to continue to sustain themselves in the short-term, as the effect of stimulus programs is yet to bear fruit and tax cuts are working their way through the system in 2010. Due to the strong position of liquidity in the market, large corporations now have access to capital in the corporate credit markets. | |India’s Economic Outlook Projection | | | | | | | | | | |2007 |2008 |2009 |2010 | | | | | | | | |GDP Growth | |9. 40% |7. 30% |5. 40% |7. 20% | |CPI | |6. 0% |9. 30% |5. 50% |4. 90% | Indian Economy 2010 In order to keep up the economic growth during times of the worst recession, government authorities in India have announced the stimulus packages to bolster economic growth. To finance the stimulus packages, the Indian government has raised over $100 billion over the last four quarters. The country’s public debt, according to the Reserve Bank of Indian (RBI), has zoomed to more than 50% of the total GDP and the RBI has started printing new currency notes. Central Government Debt | | | | |in Rs. Crores (10 Million) |Q3 2008 |Q3 2009 |% of GDP | | | | | | | | | | | |Public Debt (Sum of 1 and 2) |2,099,286. 23 |2,505,450. 74 |50. 71% | | | | | |1. External Debt |237,351. 77 |294,941. 67 | | | | | | |2. Internal Debt |1,861,934. 46 |2,210,509. 7 | | | | | | India’s Economic Relations India has important and strong economic relations with many countries in the world. Traditionally India has maintained trade relations with various countries. After the economic reforms of the early nineties, the Indian economy was opened up to further bilateral trade relations with various countries and to Foreign Direct Investment (FDI). Import restrictions on many items were lifted which led to expansion of India’s economic relations with other nations. Some of the countries with which India has strong economic relations are – United States of America • United Kingdom • Japan • China • Germany • Canada • Switzerland • Italy India’s Economic Relations with US India’s economic relations with the United States of America have grown since the economic reforms. India ranks 24th among the trade partners of the US in terms of exports and 18th in terms of imports. The Indo-US Economic Dialogue of 2003 was a major step in strengthening economic relations between India and the United States. The major export items from India to theUnited States include – • Fish • Seafood • Precious stones • Textile products Apparels • Metals • Machinery • Organic Chemicals • Iron and steel products The major import items to India from the United States include – • Medical and surgical equipments • Computers and computer parts • Gas turbines • Telecom • Electrical Machinery • Plastic • Cotton • Wooden pulp India’s Economic Relations with UK India also has strong economic relations with the United Kingdom. India was a British colony for more than 200 years. Economic relations between India and the UK have undergone radical changes since the colonial period. UK ranks fifth among India’s trade partners.
However before 2002, UK was the second leading trading partner of India. India is one of the leading export markets of the United Kingdom among the developing nations. Significant Foreign Direct Investment (FDI) has taken place in India from the United Kingdom. Major FDI inflows to India from UK have taken place in the following sectors – • Power • Telecom • Oil and Gas • Service industries The major export items from India to the United Kingdom include – • Rice • Tea • Garments • Textiles • Gems and Jewelry • Leather and leather goods • Footwear • Metal products • Softwares Pharmaceutical products The major import items to India from the United Kingdom include – • Gold • Rough diamond • Telecom equipment • Power generating equipment • Transport equipment • Industrial machinery • Chemicals India’s Economic Relations with Japan India’s economic relations with Japan dates back to many centuries. The economic relations between the two nations have been traditionally very strong. Japan has provided substantial loans to India in the form of aid and technical co-operation in recent years. Japan is the second largest export destination of India.
The major export items from India to Japan include – • Marine products • Cotton yarn • Gems • Iron ore The major import items to India from japan include – • Plant related products • Machinery • Electronic • Transport equipment India’s Economic Relations with China India’s buoyant economic relations with China in recent years have been one of the most importanteconomic developments. The major export item from India to China is Iron ore which constitutes 53% of India’s exports to China. Machinery is the most important import item to India from China accounting for 36% of aggregate imports.