Indian Economy

Since the last two decades Indian economy is on a rise and has proved its mettle to the indian. India is one of the fastest growing economies and is often considered as one of the major super powers. India is an Asian nation with seventh largest land base and second largest in term of population. The economy of India is the largest economy in the indian by nominal GDP and the fourth largest by purchasing power parity (PPP).

Understanding Indian Economy:

Indian economy stands today as one of the influential and attractive economy. The liberalization move by the Indian Government in 1990s has given a boost to the Indian economy and put her into a fast track economic growth route. With the beginning of the new millennium, India was considered as an emerging super power. In 2009, Indian GDP based on purchasing power parity (PPP) stood at USD 3.5 trillion making it the fourth largest economy. India’s service industry accounts for 62.5% of the GDP while the industrial sector contributes 20% to the GDP. The agricultural sector which was the back bone of Indian economy post-independence took a back seat in 21st century and contributed only 17.5% to the GDP. India growth rate has been an average of 7% since 1997 and has maintained a growth rate above 5% even in times of global recession. The Information Technology and IT outsourcing services has been the biggest contributor to India’s growth. India’s per capital income (PPP) is not too attractive and stands at USD 4542. India currently accounts for 1.5% of the total indian trade as per WTO, 2007 publications.

Indian Sector Analysis:

Indian Economy VS Industry:

Industrial activities accounts for 20% of the economy. India is characterized by small and medium manufacturing units with few major players. 14% of the total workforce is engaged in manufacturing activities. Liberalization has brought in many private players and multi national organizations into manufacturing foray.

Services - Service Providers & Services Sector contribution:

India is one of the leading service providers and services sector contributed 62.5% to the GDP and employ 34% of the work force. With large base of English speaking educated people, India has become a preferred destination for business services.


Though agricultural activities employ 52% of the total work force yet it contributes only 17.5% to the total GDP. Mostly, agriculture is carried out using traditional methods and farmers are dependent on heavily on monsoons. Green revolution and white revolution has given a boost to this sector but it is yet embrace technology on a large scale.

Banking and Finance:

India has one the largest network of bank branches and most of the people in India enjoy banking facilities. India has a robust banking economy which was proved by the fact that it remained largely unaffected by the global recessions.

External Trade and Investments:

Balance of Payments:

India’s balance of payment has been in RED since independent and though growing exports in post-liberalization era is expected to bring it down, the current rising oil bill is making it look difficult.

Foreign Direct Investments (FDI):

India is the preferred destination for FDI since liberalization. Industrial reforms have made the scenario more attractive and with growing economy it looks promising in terms of return. 

Global Trade Relations:

Since liberalization India’s contribution to total global trade has increased to 5%. China, UK, The US, Japan, Russia and EU are the major trading partners to India. Both imports and exports have taken a leap by 20% on an average.


Though India is considered as a major economic power but it faces many challenges.

Indian Economy VS Agriculture:

Agriculture sector in India lacks innovation and investment. It still uses the traditional methods of farming giving less produce per hectare of cultivated land as compared to global standards. The total area under farming is also reduced due to growing industrialization and urbanization. India has to strike a balance between industrial growth and agricultural growth.

Effect of Poverty :

24% of the Indian population lives below the poverty line (USD 1.25 per day). There is a large regional income disparity in India where six low income states are home to more than one third of population. According to Indian Bank, India is classified as low income economy.

Effect Corruption:

Corruption has been a wide spread problem in India. Liberalization has reduced the red tape and bureaucracy but still it never lost it ground. Most of the government spending fail to reach the general public and government initiative are marked by large scale corruption.