An Insight into the

Indian Economy

University of Wroclaw
Development Economics
Meha Lodha
2nd December 2009
 India/Bharat/Hindustan
• Political Capital – New Delhi
• Financial & Commercial Capital – Mumbai
• Independence 1947 (62 years)
• Parliamentary Democracy
• Mixed Economy
• Official Languages – Hindi, English
• 28 states, 7 union territories
• Indian Rupee (1USD = Rs. 45 (approx))
 1947 to 1990
• Socialist inspired economy
• License Raj – licenses, protectionism, red
tapism
• Green Revolution
• No famine after colonial period
• Major balance of payments crisis
• Bailout from IMF in exchange of reforms
 From 1991...
• Market based system
• Economic liberalisation
• Automatic approval of FDI in many sectors
• Constant economic growth
• Increasing life expectancy, literacy rates
• Privatization, foreign competition
 Demographics
• Population 1.17 billion - 1/6th of world’s population
• 1.3% annual population growth
• 72% in villages, 28% in cities
• 2000+ ethnic groups
• 216 languages and 22 official languages
• 66% Literacy rate
• 22% below Poverty Line
• 7.8% Unemployment Rate
• 1.064 males/female
• Life expectancy 65 years
 Population & Growth Rate
1400000

1200000

1000000

800000

600000

400000

200000

0
1951 1961 1971 1981 1991 2001 2009

2.5

2.2 2.2
2.1
2
1.9
1.7
1.5
1.3

0.5

0
1950-1960 1960-1970 1970-1980 1980-1990 1990-2000 2000-2010
 Age Structure & Religion

1%

•65+ years 2%
5% 2%

•0-14 years 13%

31%

•Hindus
•Muslims
•Christians
•Sikhs
•Buddhists

•15-64 years
64% 82%
Literacy Rate
 Indian Economy
70%

60%
60%
54%

50%

40%
% of GDP
% of workforce
30% 28%
23%

20% 19%
17%

10%

0%
Agriculture Industry Services
Leading exporters of commercial
services, growth 2000 - 2007
 GDP
10
9
8
7
6
5
4
3
2
1
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

GDP - real growth rate (%)

4000

3500
3000

2500

2000

1500

1000

500

0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

GDP - per capita (PPP) (US$)

 FDI Inflows
• 2005-06 $7.8 b
• 2006-07 $19.5 b
• 2007-08 $24 b
• 2008-09 $35b (est.)
 IT & BPO
• Share in exports – Particulars FY 2004 FY 2005 FY 2006
FY2007
E

1% in 1990 to 18% IT Services

- Exports
10.4
7.3
13.5
10.0
17.8
13.13
23.7
18.1

in 2001 - Domestic
ITES-BPO
3.1
3.4
3.5
5.2
4.5
7.2
5.6
9.5
- Exports 3.1 4.6 6.3 8.3

• Bangalore (India’s - Domestic 0.3 0.6 0.9 1.2

Engineering services,

Silicon Valley) R&D and

Software
products 2.9 3.9 5.3 6.5

• Chennai - Exports
- Domestic
2.5
0.4
3.1
0.7
4.0
1.3
4.9
1.6

• India and EU – Joint

Hardware 5.0 5.9 7.0 8.2
Total IT industry 21.6 28.4 37.4 47.8
- Exports 13.4 18.2 24.1 31.9

R&D - Domestic 8.3 10.2 13.2 15.9

TATA NANO
• Least expensive car
in the world
• Low end model
$2000
• Nano Europa $6000
 Exports and Imports
• $175.7 b • $ 287.5 b
• Petroleum products • Crude oil
• Textile goods • Machinery
• Gems and jewelry • Gems
• Engineering goods • Fertilizers
• Chemicals • Chemicals
• Leather
manufactures
Economic Issues
 Poverty
• 42% below IPL (from 60% in 1981)
• 456 million Indians
• 1/3rd of global poor
• Caste System
• Colonial rule
• Positive Discrimination – Scheduled
Castes, Tribes, Backward Classes
• 80% of population less than $2/day
 Land
• Avg. size of land holdings < 20,000 m2

• $ 98 b manufacturing investments on hold – land

acquisition problems

• Mumbai – 23,088/Km2 – most populous city, 7th

most densely populated city in the world

• Delhi – 28,438/Km2 – 4th most populated city, 3rd

most densely populated city in the world
 Literacy
• 12% in 1947 to 66% in 2007
• Largest illiterate population
• Adult literacy rates 77% for men and 55%
for women
• Youth Literacy rate 82%
• 120 million receive free lunches in Indian
schools every day, making it the largest
school meal program in the world
Corruption Index
 Classes in Society
• Lower Class
• Lower middle class
• Middle Class
• Upper middle class
• Upper class/Elite
???