From Wikipedia, the free encyclopedia.
The economy of India has a long history. It has followed a socialist-inspired policies for most of its independent history, which have included extensive public ownership, regulation, red tape, and trade barriers collectively known as License Raj. India developed at substantially slower pace than many other Asian countries and slipped in rankings.[3][4] After sliding into near bankruptcy, India launched fundamental reforms in 1991 and has progressed towards a market-based system.[3][5] In the late 2000s, India's growth has reached 7.5%, which will double the average income in a decade.[3] McKinsey states that removing main obstacles "would free India’s economy to grow as fast as China’s, at 10 percent a year".[6] The World Bank suggests that the most important priorities are public sector reform, infrastructure, agricultural and rural development, removal of labor regulations, reforms in lagging states, and HIV/AIDS.[7] In India's federal system, states have large responsibilities in setting their policies. The annualized 1999-2008 growth rates for Gujarat (8.8%), Haryana (8.7%), or Delhi (7.4%) were significantly higher than for Bihar (5.1%), Uttar Pradesh (4.4%), or Madhya Pradesh (3.5%).[8] India is the twelfth-largest economy in the world and the fourth largest by purchasing power parity adjusted exchange rates (PPP). On per capita basis, it ranks 128th in the world or 118th by PPP. India has a rising middle class which affords consumer goods such as bicycles (around 40% of households[9]) and motorcycles (around 10% of households[9]). Nevertheless, a large proportion of the population is poor as most people in India live on less than two purchasing power adjusted dollars a day. Half of children are underweight, nearly double that of Sub-Saharan Africa.[10] In terms of occupation, two-thirds of the Indian workforce earn their livelihood directly or indirectly through agriculture in rural villages. Green Revolution has improved yields significantly and India has not experienced famines since the early 1970s. As a proportion of GDP, towns and cities make over two thirds of the Indian economy. Service markets which now enjoy much lighter burden of regulation and other obstacles have been most successful, for instance, communications and world-famous business process services.[3][11] In terms of jobs, textiles are the largest sector after agriculture. India's trade has risen from 6% of GDP in 1985 to 24% in 2006, which is still moderate.[3][12] India's share of world trade is around 1%, compared with 0.5% in 1991.[13] Textiles, jewellery, engineering goods and software are major export commodities while crude oil, machineries, fertilizers, and chemicals are major imports.
HistoryIndia's economic history can be broadly divided into three eras, beginning with the pre-colonial period lasting up to the 17th century. The advent of British colonisation started the colonial period in the 17th century, which ended with independence in 1947. The third period stretches from independence in 1947 until now. Pre-colonialThe citizens of the Indus Valley civilisation, a permanent and predominantly urban settlement that flourished between 2800 BC and 1800 BC, practiced agriculture, domesticated animals, used uniform weights and measures, made tools and weapons, and traded with other cities. Evidence of well planned streets, a drainage system and water supply reveals their knowledge of urban planning, which included the world's first urban sanitation systems and the existence of a form of municipal government.[14] 
The 1872 census revealed that 99.3% of the population of the region constituting present-day India resided in villages,[15] whose economies were largely isolated and self-sustaining, with agriculture the predominant occupation. This satisfied the food requirements of the village and provided raw materials for hand-based industries, such as textiles, food processing and crafts. Although many kingdoms and rulers issued coins, barter was prevalent. Villages paid a portion of their agricultural produce as revenue to the rulers, while its craftsmen received a part of the crops at harvest time for their services.[16] Religion, especially Hinduism, and the caste and the joint family systems, played an influential role in shaping economic activities.[17] The caste system functioned much like medieval European guilds, ensuring the division of labour, providing for the training of apprentices and, in some cases, allowing manufacturers to achieve narrow specialization. For instance, in certain regions, producing each variety of cloth was the speciality of a particular sub-caste. .png)
Textiles such as muslin, Calicos, shawls, and agricultural products such as pepper, cinnamon, opium and indigo were exported to Europe, the Middle East and South East Asia in return for gold and silver.[19] Assessment of India's pre-colonial economy is mostly qualitative, owing to the lack of quantitative information. One estimate puts the revenue of Akbar's Mughal Empire in 1600 at £17.5 million, in contrast with the total revenue of Great Britain in 1800, which totalled £16 million.[20] India, by the time of the arrival of the British, was a largely traditional agrarian economy with a dominant subsistence sector dependent on primitive technology. It existed alongside a competitively developed network of commerce, manufacturing and credit. After the fall of the Mughals, India was administered by Maratha Empire. The Maratha Empire's budget in 1740s, at its peak, was Rs. 100 million. After the loss at Panipat, the Maratha Empire disintegrated into confederate states of Gwalior, Baroda, Indore, Jhansi, Nagpur, Pune and Kolhapur. Gwalior state had a budget of Rs. 30M. However, at this time, British East India company entered the Indian political theatre. Until 1857, when India was firmly under the British crown, the country remained in a state of political instability due to internecine wars and conflicts.[21] Colonial
Company rule in India brought a major change in the taxation environment from revenue taxes to property taxes resulting in mass impoverishment and destitution of the great majority of farmers, resulting in numerous famines.[22] The economic policies of the British Raj effectively destroyed India's large handicrafts industry and caused a massive drain of India's resources.[23][24] An estimate by Cambridge University historian Angus Maddison reveals that India's share of the world income fell from 22.6% in 1700, comparable to Europe's share of 23.3%, to a low of 3.8% in 1952.[25] It also created an institutional environment that, on paper, guaranteed property rights among the colonizers, encouraged free trade, and created a single currency with fixed exchange rates, standardized weights and measures, capital markets, a well developed system of railways and telegraphs, a civil service that aimed to be free from political interference, and a common-law, adversarial legal system.[26] India's colonisation by the British coincided with major changes in the world economy—industrialisation, and significant growth in production and trade. However, at the end of colonial rule, India inherited an economy that was one of the poorest in the developing world,[27] with industrial development stalled, agriculture unable to feed a rapidly growing population, one of the world's lowest life expectancies, and low rates of literacy. The impact of the British rule on India's economy is a controversial topic. While leaders of the Indian independence movement, and left-nationalist economic historians have blamed colonial rule for the dismal state of India's economy in its aftermath, right-wing historians have countered that India's economic performance was due to various sectors being in a state of growth and decline, resulting from changes brought about by colonialism and a world that was moving towards industrialization and economic integration.[28] Independence to 1991Indian economic policy after independence was influenced by the colonial experience (which was seen by Indian leaders as exploitative in nature) and by those leaders' exposure to Fabian socialism. Policy tended towards protectionism, with a strong emphasis on import substitution, industrialization, state intervention in labor and financial markets, a large public sector, business regulation, and central planning.[29] Five-Year Plans of India resembled central planning in the Soviet Union. Steel, mining, machine tools, water, telecommunications, insurance, and electrical plants, among other industries, were effectively nationalized in the mid-1950s.[30] Elaborate licences, regulations and the accompanying red tape, commonly referred to as Licence Raj, were required to set up business in India between 1947 and 1990.[31] Jawaharlal Nehru, the first prime minister, along with the statistician Prasanta Chandra Mahalanobis, carried on by Indira Gandhi formulated and oversaw economic policy. They expected favorable outcomes from this strategy, because it involved both public and private sectors and was based on direct and indirect state intervention, rather than the more extreme Soviet-style central command system.[32] The policy of concentrating simultaneously on capital- and technology-intensive heavy industry and subsidizing manual, low-skill cottage industries was criticized by economist Milton Friedman, who thought it would waste capital and labour, and retard the development of small manufacturers.[33] India's low average growth rate from 1947–80 was derisively referred to as the Hindu rate of growth, because of the unfavourable comparison with growth rates in other Asian countries, especially the "East Asian Tigers".[26] 
The Rockefeller Foundation's research in high-yielding varieties of seeds, their introduction after 1965 and the increased use of fertilizers and irrigation are known collectively as the Green Revolution, which provided the increase in production needed to make India self-sufficient in food grains, thus improving agriculture in India. Famine in India, once accepted as inevitable, has not returned since the introduction of Green Revolution crops. After 1991In the late 80s, the government led by Rajiv Gandhi eased restrictions on capacity expansion for incumbents, removed price controls and reduced corporate taxes. While this increased the rate of growth, it also led to high fiscal deficits and a worsening current account. The collapse of the Soviet Union, which was India's major trading partner, and the first Gulf War, which caused a spike in oil prices, caused a major balance-of-payments crisis for India, which found itself facing the prospect of defaulting on its loans.[35] India asked for a $1.8 billion bailout loan from IMF, which in return demanded reforms.[36] In response, Prime Minister Narasimha Rao along with his finance minister Manmohan Singh initiated the economic liberalisation of 1991. The reforms did away with the Licence Raj (investment, industrial and import licensing) and ended many public monopolies, allowing automatic approval of foreign direct investment in many sectors.[37] Since then, the overall direction of liberalisation has remained the same, irrespective of the ruling party, although no party has tried to take on powerful lobbies such as the trade unions and farmers, or contentious issues such as reforming labour laws and reducing agricultural subsidies.[38] Since 1990 India has emerged as one of the fastest-growing economies in the developing world; during this period, the economy has grown constantly, but with a few major setbacks. This has been accompanied by increases in life expectancy, literacy rates and food security. While the credit rating of India was hit by its nuclear tests in 1998, it has been raised to investment level in 2007 by S&P and Moody's.[39] In 2003, Goldman Sachs predicted that India's GDP in current prices will overtake France and Italy by 2020, Germany, UK and Russia by 2025 and Japan by 2035. By 2035, it was projected to be the third largest economy of the world, behind US and China.[40][41] In the revised 2007 figures, based on increased and sustaining growth, more inflows into foreign direct investment, Goldman Sachs predicts that "from 2007 to 2020, India’s GDP per capita in US$ terms will quadruple", and that the Indian economy will surpass the United States (in US$) by 2043.[42] Goldman Sachs has outlined 10 things that it needs to do in order to achieve its potential and grow 40 times by 2050. These are 1.improve governance 2.raise educational achievement 3.increase quality and quantity of universities 4.control inflation 5.introduce a credible fiscal policy 6.liberalize financial markets 7.increase trade with neighbours 8.increase agricultural productivity 9.improve infrastructure and 10.improve environmental quality.[43] SectorsAgriculture
India ranks second worldwide in farm output. Agriculture and allied sectors like forestry, logging and fishing accounted for 16.6% of the GDP in 2007, employed 60% of the total workforce[44] and despite a steady decline of its share in the GDP, is still the largest economic sector and plays a significant role in the overall socio-economic development of India. Yields per unit area of all crops have grown since 1950, due to the special emphasis placed on agriculture in the five-year plans and steady improvements in irrigation, technology, application of modern agricultural practices and provision of agricultural credit and subsidies since Green revolution in India. However, international comparisons reveal that the average yield in India is generally 30% to 50% of the highest average yield in the world.[45] 
Productivity issuesIn developed countries, agriculture makes up just a few percentages of jobs. In India, it makes up most jobs. The World Bank credits the Green Revolution for helping to increase grain production in the 1970s. Since 1990s, rural sectors have grown slowly. The World Bank identifies following main problems:[46]
In water and irrigation management, the World Bank identifies:[46]
The low productivity in India is a result of the following factors:
India has many farm insurance companies that insure wheat, fruit, rice and rubber farmers in the event of natural disasters or catastrophic crop failure, under the supervision of the Ministry of Agriculture. One notable company that provides all of these insurance policies is agriculture insurance company of india and it alone insures almost 20 million farmers. Industry
Industry accounts for 27.6% of the GDP and employ 17% of the total workforce.[44] However, about one-third of the industrial labour force is engaged in simple household manufacturing only.[50] In absolute terms, India is fourteenth in the world in factory output. India's labor regulations, which are heavy even by developing country standards, hamper the large-scale creation of formal industrial jobs.[3][51][52] Economic reforms brought foreign competition, led to privatisation of certain public sector industries, opened up sectors hitherto reserved for the public sector and led to an expansion in the production of fast-moving consumer goods.[53] Post-liberalisation, the Indian private sector, which was usually run by oligopolies of old family firms and required political connections to prosper was faced with foreign competition, including the threat of cheaper Chinese imports. It has since handled the change by squeezing costs, revamping management, focusing on designing new products and relying on low labour costs and technology.[54] 
Textile manufacturing is the second largest source for employment after agriculture and accounts for 26% of manufacturing output.[49] Tata Motors' Famous industrial products include Nano, which claims to be the world's least expensive car.[55] Tirupur has gained universal recognition as the leading source of hosiery, knitted garments, casual wear and sportswear.[56] Dharavi in Mumbai has gained fame as a dense industrial hub. ServicesIndia is fifteenth in services output. It provides employment to 23% of work force, and it is growing fast, growth rate 7.5% in 1991–2000 up from 4.5% in 1951–80. It has the largest share in the GDP, accounting for 55% in 2007 up from 15% in 1950.[44] Business services (information technology, information technology enabled services, business process outsourcing) are among the fastest growing sectors contributing to one third of the total output of services in 2000. The growth in the IT sector is attributed to increased specialization, and an availability of a large pool of low cost, but highly skilled, educated and fluent English-speaking workers, on the supply side, matched on the demand side by an increased demand from foreign consumers interested in India's service exports, or those looking to outsource their operations. India's IT industry, despite contributing significantly to its balance of payments, accounted for only about 1% of the total GDP or 1/50th of the total services in 2001[57] However the contribution of IT to GDP increased to 4.8 % in 2005-06 and is projected to increase to 7% of GDP in 2008[58][59] 
Most Indian shopping takes place in open markets and millions of independent grocery shops called kirana. Organized retail such supermarkets accounts for just 4% of the market as of 2008.[60] Regulations prevent most foreign investment in retailing. Moreover, over thirty regulations such as "signboard licences" and "anti-hoarding measures" may have to be complied before a store can open doors. There are taxes for moving goods to states, from states, and even within states.[60]
FinanceThe Indian money market is classified into: the organised sector (comprising private, public and foreign owned commercial banks and cooperative banks, together known as scheduled banks); and the unorganised sector (comprising individual or family owned indigenous bankers or money lenders and non-banking financial companies (NBFCs)). The unorganised sector and microcredit are still preferred over traditional banks in rural and sub-urban areas, especially for non-productive purposes, like ceremonies and short duration loans.[61] Prime Minister Indira Gandhi nationalised 14 banks in 1969, followed by six others in 1980, and made it mandatory for banks to provide 40% of their net credit to priority sectors like agriculture, small-scale industry, retail trade, small businesses, etc. to ensure that the banks fulfill their social and developmental goals. Since then, the number of bank branches has increased from 10,120 in 1969 to 98,910 in 2003 and the population covered by a branch decreased from 63,800 to 15,000 during the same period. The total deposits increased 32.6 times between 1971 to 1991 compared to 7 times between 1951 to 1971. Despite an increase of rural branches, from 1,860 or 22% of the total number of branches in 1969 to 32,270 or 48%, only 32,270 out of 5 lakh (500,000) villages are covered by a scheduled bank.[62][63] Since liberalisation, the government has approved significant banking reforms. While some of these relate to nationalised banks (like encouraging mergers, reducing government interference and increasing profitability and competitiveness), other reforms have opened up the banking and insurance sectors to private and foreign players.[64][44] Natural resources
India's total cultivable area is 1,269,219 km² (56.78% of total land area), which is decreasing due to constant pressure from an ever growing population and increased urbanisation. India has a total water surface area of 314,400 km² and receives an average annual rainfall of 1,100 mm. Irrigation accounts for 92% of the water utilisation, and comprised 380 km² in 1974, and is expected to rise to 1,050 km² by 2025, with the balance accounted for by industrial and domestic consumers. India's inland water resources comprising rivers, canals, ponds and lakes and marine resources comprising the east and west coasts of the Indian ocean and other gulfs and bays provide employment to nearly 6 million people in the fisheries sector. In 2008, India had the world's third largest fishing industry.[66] India's major mineral resources include Coal (3rd-largest reserves in the world), Iron ore, Manganese, Mica, Bauxite, Titanium ore, Chromite, Natural gas, Diamonds, Petroleum, Limestone and Thorium (world's largest along Kerala's shores). India's oil reserves, found in Bombay High off the coast of Maharashtra, Gujarat, and in eastern Assam meet 25% of the country's demand.[67][44] Rising energy demand concomitant with economic growth has created a perpetual state of energy crunch in India. India is poor in oil resources and is currently heavily dependent on coal and foreign oil imports for its energy needs. Though India is rich in Thorium, but not in Uranium, which it might get access to in light of the nuclear deal with US. India is rich in certain energy resources which promise significant future potential - clean / renewable energy resources like solar, wind, biofuels (jatropha, sugarcane). Government
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The current government has concluded that most spending fails to reach its intended recipients.[69] Lant Pritchett calls India's public sector "one of the world's top ten biggest problems - of the order of AIDS and climate change".[69] The Economist's article about Indian civil service (2008) says that Indian central government employs around 3 million people and states another 7 million, including "vast armies of paper-shuffling peons"[69]. According to a government officer responsible for personnel, India has 80,000 "Category One" Indian Administrative Service (IAS) bureaucrats who make decisions.[69] Furthermore, the Economist writes that an elite of merely 5600 members "mostly runs India".[69] India is divided to 604 districts, size of small countries.[69] The Economist described how a district head officer spends 60% of his time dealing individual supplicants asking for things such as alms or firewood instead of larger issues.[69] Million dollar bureaucracies can be run without a single computer in the management.[69] At local level, administration can be worse. It is not unheard of that most state assembly seats are hold by convicted criminals.[70] The Reserve Bank of India has warned that India's public-debt to GDP ratio is over 70 percent.[71] One study found out that 25% of public sector teachers and 40% of public sector medical workers could not be found at the workplace. Among teachers who were paid to teach, absence rates ranged from 15% in Maharashtra to 71% in Bihar. Only 1 in nearly 3000 public school head teachers had ever dismissed a teacher for repeated absence. Despite poorer absence rates, public sector teachers enjoy salaries at least five times higher than private sector teachers. India's absence rates are one of the worst in the world.[72][73][74][75] A greater private sector role with means such as education vouchers has been proposed.[74] Infrastructure
Development of infrastructure was completely in the hands of the public sector and was plagued by corruption, bureaucratic inefficiencies, urban-bias and an inability to scale investment.[76] India's low spending on power, construction, transportation, telecommunications and real estate, at $31 billion or 6% of GDP in 2002 had prevented India from sustaining higher growth rates. This has prompted the government to partially open up infrastructure to the private sector allowing foreign investment[77][78][68] which has helped in a sustained growth rate of close to 9% for the past six quarters.[79] Some 600 million Indians have no mains electricity at all.[80] While 80 percent of Indian villages have at least an electricity line, just 44 percent of rural households have access to electricity.[81] According to a sample of 97,882 households in 2002, electricity was the main source of lighting for 53% of rural households compared to 36% in 1993.[82] Some half of the electricity is stolen, compared with 3% in China. The stolen electricity amounts to 1.5% of GDP.[83][81] Almost all of the electricity in India is produced by the public sector. Power outages are common.[80] Many buy their own power generators to ensure electricity supply. As of 2005 the electricity production was at 661.6 billion kWh with oil production standing at 785,000 bbl/day. In 2007, electricity demand exceeded supply by 15%.[80] Multi Commodity Exchange has tried to get a permit to offer electricity future markets.[84] Indian Road Network is developing. Trucking goods from Gurgaon to the port in Mumbai can take up to 10 days.[13] Taxes and bribes are common between state borders; Transparency International estimates that truckers pay annually $5 billion in bribes.[85][13] India has the world's second largest road network.[86] Although India has only 1% of the world's vehicles, India has 8 per cent of the world's vehicle fatalities.[87][88] Container traffic is growing at 15% a year.[89] Some 60% of India’s container traffic is handled by the Jawaharlal Nehru Port Trust in Mumbai. It has just 9 berths compared to 40 in Singapore's main port. It takes an average of 21 days to clear import cargo in India compared to just 3 in Singapore.[80] China had 30 times more container traffic in 2004.[90] In 2007, an article by Businessweek reported that India's cell-phone market is the fast growing in the world and companies adding some 6 million new customers a month.[13] Very few Indians use Internet. As of January 15, 2007, there were 2.10 million broadband lines in India.[91] The entire India has only 25,000 tourist-class hotel rooms, compared with more than 140,000 in Las Vegas alone. Hotel companies see opportunities for big investments.[13] In some places, no major irrigation works have been done since the British era despite opportunities to boost agricultural productivity. Some 700 million Indians do not have access to a proper toilet.[80] Only 13% of sewage is treated according to one estimate, leaving rivers and other water resources under severe strain.[80] Most cities supply water only a few hours a day and none provides 24h water. A World Bank report says it is an institutional problem in water agencies, or "how the agency is embedded in the relationships between politics and the citizens who are the consumers."[90]
Currency and finance
The Indian rupee is the only legal tender accepted in India. The exchange rate as of November 18, 2008 is about 49.27 to a US dollar, [92] 64.01 to a Euro, and 80.45 to a UK pound. The Indian rupee is accepted as legal tender in the neighboring Nepal and Bhutan, both of which peg their currency to that of the Indian rupee. The rupee is divided into 100 paise. The highest-denomination banknote is the 1,000 rupee note; the lowest-denomination coin in circulation is the 1 rupee coin (it earlier had 25 & 50 paise coins which have been discontinued by the Reserve Bank of India).[93] There has been a recent fall in the value of the Rupee as a result of the global financial crisis of 2008, as foreign institutional investors sell large amounts of Indian stocks and invest in US treasury bonds. India inherited several institutions, such as the civil services, Reserve Bank of India, railways, etc., from its British rulers. Mumbai serves as the nation's commercial capital, with the Reserve Bank of India (RBI), Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) located here. The headquarters of many financial institutions are also located in the city. The RBI, the country's central bank was established on April 1, 1935. It serves as the nation's monetary authority, regulator and supervisor of the financial system, manager of exchange control and as an issuer of currency. The RBI is governed by a central board, headed by a governor who is appointed by the Central government of India. The BSE Sensex or the BSE Sensitive Index is a value-weighted index composed of 30 companies with April 1979 as the base year (100). These companies have the largest and most actively traded stocks and are representative of various sectors, on the Exchange. They account for around one-fifth of the market capitalisation of the BSE. The Sensex is generally regarded as the most popular and precise barometer of the Indian stock markets. Incorporated in 1992, the National Stock Exchange is one of the largest and most advanced stock markets in India. The NSE is the world's third largest stock exchange in terms of transactions. There are a total of 23 stock exchanges in India, but the BSE and NSE comprise 83% of the volumes.[94] The Securities and Exchange Board of India (SEBI), established in 1992, regulates the stock markets and other securities markets of the country. CompaniesFormal companies provide only a small proportion of jobs. 34 Indian companies have been listed in the Forbes Global 2000 ranking for 2008.[95] The 10 leading companies are:
Socio-economic characteristicsIncome and consumption
As of 2005, 85.7% of the population lives on less than $2.50 (PPP) a day, down from 92.5% in 1981. This compares with 80.5% in Sub-Saharan Africa.[96] 75.6% of the population lives on less than $2 a day (PPP), which is around 20 rupees or $0.5 a day in nominal terms. It was down from 86.6% and compares with 73.0% in Sub-Saharan Africa.[97][98][99][100][96] A 24.3% of the population earned less than $1 (PPP, around $0.25 in nominal terms) a day in 2005, down from 42.1% in 1981.[96][101] 41.6% of its population is living below the new international poverty line of $1.25 (PPP) per day, down from 59.8% in 1981.[96] The World Bank further estimates that a third of the global poor now reside in India. Today, more people afford to a bicycle than ever before. Some 40% of Indian households owns a bicycle, with ownership rates ranging from around 30% to 70% at state level.[9] Housing is still very modest. According to Times of India, "a majority of Indians have per capita space equivalent to or less than a 10 feet x 10 feet room for their living, sleeping, cooking, washing and toilet needs." and "one in every three urban Indians lives in homes too cramped to exceed even the minimum requirements of a prison cell in the US."[102] The average is 103 sq ft per person in rural areas and 117 sq ft per person in urban areas.[102] Poverty in India is some of the starkest in the world. Around half of Indian children are malnourished. The proportion of underweight children is nearly double that of Sub-Saharan Africa.[10][103] However, India has not had famines since the Green Revolution in the early 1970s. While poverty in India has reduced significantly, official figures estimate that 27.5%[104] of Indians still lived below the national poverty line of $1 (PPP, around 10 rupees in nominal terms) a day in 2004-2005.[105] A 2007 report by the state-run National Commission for Enterprises in the Unorganised Sector (NCEUS) found that 65% of Indians, or 750 million people, lived on less than 20 rupees per day[106] with most working in "informal labour sector with no job or social security, living in abject poverty."[107] Since the early 1950s, successive governments have implemented various schemes, under planning, to alleviate poverty, that have met with partial success. All these programmes have relied upon the strategies of the Food for work programme and National Rural Employment Programme of the 1980s, which attempted to use the unemployed to generate productive assets and build rural infrastructure.[68] In August 2005, the Indian parliament passed the Rural Employment Guarantee Bill, the largest programme of this type in terms of cost and coverage, which promises 100 days of minimum wage employment to every rural household in 200 of India's 600 districts. The question of whether economic reforms have reduced poverty or not has fuelled debates without generating any clear cut answers and has also put political pressure on further economic reforms, especially those involving the downsizing of labour and cutting agricultural subsidies.[108][109] McKinsey has made an animation of the income distribution. Education and employment
Around two thirds of Indian children can not read a simple story.[90] Around two thirds can not calculate a simple division.[90] Agricultural and allied sectors accounted for about 57% of the total workforce in 1999–2000, down from 60% in 1993–94. While agriculture has faced stagnation in growth, services have seen a steady growth. Of the total workforce, 8% is in the organised sector, two-thirds of which are in the public sector. The NSSO survey estimated that in 1999–2000, 106 million, nearly 10% of the population were unemployed and the overall unemployment rate was 7.32%, with rural areas doing marginally better (7.21%) than urban areas (7.65%). India's labor force is growing by 2.5% every year, but employment is growing only at 2.3% a year.[110] Unemployment in India is characterized by chronic underemployment or disguised unemployment. Government schemes that target eradication of both poverty and unemployment (which in recent decades has sent millions of poor and unskilled people into urban areas in search of livelihoods) attempt to solve the problem, by providing financial assistance for setting up businesses, skill honing, setting up public sector enterprises, reservations in governments, etc. The decreased role of the public sector after liberalization has further underlined the need for focusing on better education and has also put political pressure on further reforms.[111][68] In 2006, remittances from Indian migrants overseas made up $27 billion or about 3% of India's GDP.[112] CorruptionCorruption has been one of the pervasive problems affecting India. The economic reforms of 1991 reduced the red tape, bureaucracy and the Licence Raj that had strangled private enterprise and was blamed for the corruption and inefficiencies. Yet, a 2005 study by Transparency International (TI) India found that more than half of those surveyed had firsthand experience of paying bribe or peddling influence to get a job done in a public office.[113] The Right to Information Act (2005) and equivalent acts in the states, that require government officials to furnish information requested by citizens or face punitive action, computerisation of services and various central and state government acts that established vigilance commissions have considerably reduced corruption or at least have opened up avenues to redress grievances.[113] The 2007 report by Transparency International ranks India at 72nd place and states that significant improvements were made by India in reducing corruption.[114][115] Regional imbalance
One of the critical problems facing India's economy is the sharp and growing regional variations among India's different states and territories in terms of per capita income, poverty, availability of infrastructure and socio-economic development.[116] Between 1999 and 2008, the annualized growth rates for Gujarat (8.8%), Haryana (8.7%), or Delhi (7.4%) were much higher than for Bihar (5.1%), Uttar Pradesh (4.4%), or Madhya Pradesh (3.5%).[8] Poverty rates in rural Orissa (43%) and rural Bihar (40%) are worse than in the world's poorest countries such as Malawi.[90] On the other hand, rural Haryana (5.7%) and rural Punjab (2.4%) compare well with middle-income countries.[90] The five-year plans have attempted to reduce regional disparities by encouraging industrial development in the interior regions, but industries still tend to concentrate around urban areas and port cities[117] After liberalization, the more advanced states are better placed to benefit from them, with infrastructure like well developed ports, urbanisation and an educated and skilled workforce which attract manufacturing and service sectors. The union and state governments of backward regions are trying to reduce the disparities by offering tax holidays, cheap land, etc., and focusing more on sectors like tourism, which although being geographically and historically determined, can become a source of growth and is faster to develop than other sectors.[118][119] Environment and health
On Yale and Columbia's Environmental Performance Index, India's score is 21/100 on sanitation, compared with 67/100 for the region and 48/100 for the country income group.[120] About 1.2 billion people in developing nations lack clean, safe water because most household and industrial wastes are dumped directly into rivers and lakes without treatment. This contributes to the rapid increase in waterborne diseases in humans.[121] Out of India's 3119 towns and cities, just 209 have partial treatment facilities, and only 8 have full wastewater treatment facilities (WHO 1992).[122] 114 cities dump untreated sewage and partially cremated bodies directly into the Ganges River.[123] Downstream, the untreated water is used for drinking, bathing, and washing. This situation is typical of many rivers in India as well as other developing countries. NewsWeek describes Delhi's sacred Yamuna River as "a putrid ribbon of black sludge" where fecal bacteria is 10,000 over safety limits despite a 15-year program to address the problem.[120] Cholera epidemics are not unknown.[120] Open defecation is widespread even in urban areas of India.[124][125] Indoor air pollution from burning wood, coal and animal dung is widespread.[126] 70% of rural households in India lack ventilation. Particulate concentrations in houses are reported to range from 8,300 to 15,000 μg/m3, greatly exceeding the 75 μg/m3 maximum standard for indoor particulate matter in the United States.[127] Changes in ecosystem biological diversity, evolution of parasites, and invasion by exotic species all frequently result in disease outbreaks such as cholera which emerged in 1992 in India. The frequency of AIDS/HIV is increasing. In 1996, about 46,000 Indians out of 2.8 million (1.6 % of the population) tested were found to be infected with HIV.[128] Even in the rich regions, health care is poor. World Bank reports that "a detailed survey of the knowledge of medical practitioners for treating five common conditions in Delhi found that the typical quality doctor in a public primary health center has a more than 50-50 chance of recommending a harmful treatment". The competence rating of India's doctors is below Tanzania's.[90] External trade and investmentGlobal trade relations
International trade as a proportion of GDP reached 24% by 2006, up from 6% in 1985 and still relatively moderate.[3][12] India currently accounts for 1.2% of World trade as of 2006 according to the WTO.[131] Until the liberalisation of 1991, India was largely and intentionally isolated from the world markets, to protect its fledging economy and to achieve self-reliance. Foreign trade was subject to import tariffs, export taxes and quantitative restrictions, while foreign direct investment was restricted by upper-limit equity participation, restrictions on technology transfer, export obligations and government approvals; these approvals were needed for nearly 60% of new FDI in the industrial sector. The restrictions ensured that FDI averaged only around $200M annually between 1985 and 1991; a large percentage of the capital flows consisted of foreign aid, commercial borrowing and deposits of non-resident Indians.[132] India's exports were stagnant for the first 15 years after independence, due to the predominance of tea, jute and cotton manufactures, demand for which was generally inelastic. Imports in the same period consisted predominantly of machinery, equipment and raw materials, due to nascent industrialisation. Since liberalisation, the value of India's international trade has become more broad-based and has risen to Rs. 63,080,109 crores in 2003–04 from Rs.1,250 crores in 1950–51.[citation needed] India's major trading partners are China, the US, the UAE, the UK, Japan and the EU.[133] The exports during April 2007 were $12.31 billion up by 16% and import were $17.68 billion with an increase of 18.06% over the previous year.[134] 
India is a founding-member of General Agreement on Tariffs and Trade (GATT) since 1947 and its successor, the World Trade Organization. While participating actively in its general council meetings, India has been crucial in voicing the concerns of the developing world. For instance, India has continued its opposition to the inclusion of such matters as labour and environment issues and other non-tariff barriers into the WTO policies.[135] Although individual leaders have proposed new policies, India is still hostile to international trade. India was proud of the | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
