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GUIDE TO INDIA

ECONOMY


In June 1991 India ended 40 years of central planning. Since Independence it had been so protectionist that its share of world trade had declined from 2% in the 1950s to less than 0.5% in the 1980s. The reforms generated a huge increase in private investment, boosting exports and reducing the role of the public sector in areas including heavy manufactur­ing, banking, telecommunications, power generation and distribution. ports and roads.

In 2000-01 export growth was pegged at 26.4%, while imports rose by 5.6%. India's exports comprise some 7500 com­modities to almost 200 countries. Imports come from more than 140 countries and cover around 6500 types of products. The country's main exports are gems and jeweler, cotton yarn and fabrics, electronic goods, handicrafts, cereals, marine products, minerals, engineering goods, ready-made garments and transport equipment India's burgeoning software industry has recently emerged as a major foreign-exchange earner (see Information Technology later).

The USA is currently India's biggest trad­ing partner: export earnings increased from US$14.5 billion in 2001 to US$17.7 billion in 2002. Conversely, the USA's exports to India have only marginally risen from USS6.6 bil­lion in 2001 to US$7.1 billion in 2002.

Although the Vajpayee government claims to be improving the economic cli­mate of the nation through greater privatization, a substantial proportion of potential foreign investors claim that there is still far too much red tape involved, putting India in the 'too-hard basket'.

Agriculture

India's agricultural sector employs 65% of the labor market and accounts for almost 26% of gross domestic product. The sector is highly protected and subsidized. India is one of the world's most prolific producers of fruit, vegetables, milk, wheat, rice and sugar. Less than 1% of the raw commodities produced are processed and there are heavy restrictions on the import of processed foods. Food grains make up around 65% of India's agricultural output (175 million tones in 2001-02).

Punjab, the 'breadbasket of India', is one of the country's leading food producers (about 85% of the total land area is covered in crops, mainly wheat and rice). India is the world's second-largest producer of paddy rice and the fourth-largest wheat producer. It is the world's number-one tea producer - the main growing regions are Assam. West Ben­gal, Kerala and Tamil Nadu - and most is exported. Coffee is a smaller plantation crop; Karnataka is the major centre. Rubber is an important crop domestically ( India only im­ports about 5% of its needs). Kerala leads the country in rubber production, and together with Tamil Nadu accounts for 86% of the area given over to rubber plantation. India leads the world in the production of bananas, mangoes, coconuts and cashews, as well as potatoes, tomatoes, onions and green peas. It's among the top 10 producers of citrus, pineapples and apples.

Industry

The state and central governments own and operate many of the enterprises that supply other producers, eg, fertiliser, machinery and chemicals. The private sector is made up of thousands of producers as well as a few large conglomerates (eg, the Tata Iron and Steel Company).

Of the big industry sectors, it is textile manufacturing -jute, cotton, wool, silk and synthetics - that employs the largest work­force: presently more than 90 million people, including the associated agricultural sector. Textile (including clothing) exports currently account for approximately one-third of India's total export earnings, a healthy US$11.26 billion in 1999-2000, which is an increase of USS1.35 billion from 1996-97.

Information Technology

Despite the recent dotcom crash, India has managed to maintain a healthy position in the IT software and associated services in­dustry. Major international companies con­tinue to seek Indian involvement due to its expertise and substantial pool of highly skilled (and relatively inexpensive) labor. In fact, in 2000-01 the software industry grew by over 50%, with exports in this sec­tor contributing to just under 15% of the country's exports. The software industry grossed USS6.2 billion during this time.

A recent growth area has been call cen­tres, with Indian staff handling calls from around the world-American companies in particular are known to train their Indian staff to mimic American accents.

Tamil Nadu, Karnataka and Andhra Pradesh currently account for over 50% of India's software exports. Bangalore, 'India's Silicon Valley', is the industry's centre. Other cities which are also proving to be forces in the software industry include Mumbai, Pune. Kolkata and Ahmedabad.

India's software industry actually started in Mumbai during the early 1980s, but the high cost of living and inadequate infra­structure forced IT developers and overseas companies to look elsewhere - chiefly to Bangalore, but also to Hyderabad and Chen­nai. Nonetheless, Mumbai has maintained a firm grip on software production, particu­

larly in the film and television industries. In recent years Pune has become a popular hub for IT operations. The completion of the Mumbai-Pune Expressway in 2001, which drastically decreased commuting times be­tween the two centres, has boosted Pane's prominence in the software industry.

Tourism

Tourism is a major foreign-exchange earner for India and it also stimulates the economy by boosting employment. In 1999-2000 there were an estimated 15.5 million people employed in the Indian tourism industry. There were 2,641,157 foreign visitors to India in 2000, with India's share of the world tourism market pegged at 0.38%. Tourism is a particularly big revenue earner for the state of Rajasthan. It is estimated that around 45% of international tourists visiting India each year have Rajasthan on their itinerary.

Tourism not only aids the economy, it also helps to keep alive cultural practices. However, tourism officials say that the lack of adequate flights to India coupled with lacklustre marketing policies is severely hindering tourism growth. Poor infrastruc­ture is another impediment. The world dip in tourist movement after September 11, 2001 has also adversely affected India.

In light of the repercussions of September 11, the government and tourism officials are shifting their focus to the domestic market.