November 5, 2005
Economic Growth and Development
Economy of India
The economy of India has seen an explosive amount of growth during the past few years.
Indias economy is the fourth largest in the world in terms of purchasing power parity
(PPP) followed by a Gross Domestic Product of $3.3 trillion. India also has 8.1% Gross
Domestic Product growth rate, which is second in the world (Economy of India 2005).
India was the second fastest growing major economy in the world, with a GDP growth rate
of 8.1% at the end of the first quarter of 200506. However, Indias huge population results
in a relatively low per capita income of $3,100 at PPP (Economy of India 2005).
India has an extremely diverse economy which includes many areas in agriculture, crafts,
major industries and numerous miscellaneous services. The leading economic growth
vehicle in India would be its multitude of services, however two-thirds of the workforce in
India earn their income through agriculture. The labor force of India is estimated to be
around 482.2 million people with 57% in agriculture, 17% in industry, and 23% in other
services (Economy of India 2005).
In recent times, India has also capitalised on its large number of highly educated people
who are fluent in the English language to become a major exporter of software services,
financial services and software engineers (Economy of India 2005).
Since Indias independence it has adopted to a socialist government which has led to
government control over all aspects of the economy. This includes strict policies over the
private sector, foreign trade as well as direct foreign investment in India. However, India
has recently developed new economic reforms that have limited the governments control
on foreign investment and trade. These reforms have allowed the markets to be more open
and accessible for future investors and entrepenuers (Economy of India 2005).
The socio-economic problems India faces are a burgeoning population and lack of
infrastructure, as well as growing inequality and unemployment. Poverty also remains a
problem although it has seen a decrease of 10% since the 1980s. Indias economic history
can be broadly compartmentalised into three eras, beginning with the pre-colonial period
lasting up to the 17th century. The advent of British colonisation of the Indian subcontinent
started the colonial period in the 17th century, which ended with the Indian independence
in 1947. The third period is the post-independence period after 1947 (Economy of India
2005).
Indias growth rate of real GDP per capita(1950-2004)
