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Class: MBA-MM-I

India and its Economy (Agriculture-Industry-Services)

Our current Finance Minister Pranab Mukherjee who once said: "With strong hearts, enlightened minds and willing hands, we will have to overcome all odds and remove all obstacles to create a brave new India of our dreams. Yes, there is not scintilla of doubt that Indian economy is still growing and roaring high since the past two decades, and well the statement will be unjustified if I will not add that India is catching up global recession as well. The high reformations and the power investment schemes have lifted potential growth to almost 9% highest in Indian history; this all setup was due to improvements in infrastructure. The process of globalization has been an integral part of the recent economic progress made by India. Globalization has played a major role in export-led growth, leading to the enlargement of the job market in India. India opened its doors to globalization in the 90s let it to the miraculous growth which is being witnessed by all of us today. During the 1990s India was one of the fastest growing economies in the world and has since seen a long and unprecedented period of welfare enhancement. India's trade as a proportion of GDP rose from 13.1 per cent in 1990 to 20.3 per cent in 2000. The last decade has been one of the most tumultuous and volatile times for both, the global as well as Indian economy. We witnessed, the most horrible terror attacks, shocking financial scams were unearthed and some of the world's strongest financial institutions crumbled like a pack of cards. The Indian economy, however, continues to stand tall and unfazed and will continue to sail through these turbulent waters. The initiation of economic reforms in the 1990s saw India gradually breaking free of the low growth trap, which was euphemistically called the Hindu growth rate of 3.5 per cent per annum. Real GDP growth averaged 5.7 per cent per annum in the 1990s, which accelerated further to 7.3 per cent per annum in 2000s. A feature of the growth acceleration during the period was that while the growth rate of industry and services increased that of agriculture fell. This was because there was no notable technological breakthrough after the green revolution of the mid-1960s which saw sharp increase in yields of cereal production particularly in northern part of India. By the 1990s, the momentum of green revolution had died down. Consequently, the yield increases in the 2000s were much lower than those experienced even in the 1990s.

Notably, the decade of the 2000s encompassed the inflexion point in the growth trajectory with an annual average GDP growth of about 9 per cent for the 5-year period 2004-08. Growth in all the sub-sectors of the economy, including agriculture, accelerated during this period. However, this growth process was interrupted by the global financial crisis. Subsequently, the average growth slowed down to 7.8 per cent during 2009-11 with a noticeable slowdown in both agriculture and industry.
Indian Labour Force (in million) Usual Status 1 1. Agriculture 1.1 Self Employed 1.2 Regular Wage/Salaried Employee 1.3 Casual Labour 2. Non Agriculture 2.1 Self Employed 2.2 Regular Wage/Salaried Employee 2.3 Casual Labour Total 1993-94 2 210.7 126.6 2.9 81.2 115.8 52.1 40.2 23.4 326.5 1999-00 3 225.4 130.2 3.2 91.9 140.0 62.8 47.9 29.3 365.4 2004-05 4 238.8 153.2 2.6 83.0 169.5 79.0 55.6 34.8 408.2 2009-10 5 212.6 127.9 1.9 82.9 187.4 76.0 60.5 50.9 400.0

India's GDP before the global economic downturn The world economy rebounded strongly till 2006; the net result was a decline in the gross fiscal deficit from almost 10 per cent of GDP in 200-02 to 7.5 per cent in 2004-05 and an even larger decline in the revenue deficit from 7 per cent to 3.7 per cent of GDP.

Agriculture and allied sectors like forestry, logging and fishing accounts for 25% of the GDP. It employs almost 58% of the total work force. It is the largest economic sector and plays a significant role in the overall socio-economic development of India. Due to steady improvement in irrigation, technology, modern agricultural practices the yield per unit area of all crops has increased tremendously. Index of industrial production which measures the overall industrial growth rate was 10.1% in October 2004 as compared to 6.2% in October 2003. The largest sector here holds the textile industry. Automobile sector has also demonstrated the inherent strength of Indian labour and capital. The three main sub sectors of industry viz Mining & quarrying, manufacturing, and electricity, gas & water supply recorded growths of 5%, 8.8% and 7.1% respectively. The service sector is the fastest growing sector. It has the largest share in the GDP accounting for about 48% in 2000. Business services, communication services, financial services, community services, hotels and restaurants and trade services are among the fastest growing sectors. The two-thirds of the Indian workforce depend directly or indirectly on agriculture. However, the service sector also plays an important role in Indias economy. Indias major industries include textiles, chemicals, food processing, steel, transportation equipment, cement, mining, petroleum, machinery and software. India is a major exporter of highly-skilled workers in software, and financial services,. Due to continuous economic expansion, India has made significant progress in reducing its federal fiscal deficit. However, the massive growth of population is the fundamental social, economic, and environmental problem. India's proved to the world in the last 64 years that nothing in this world can really shake its economy -- be it recession, tsunami or scams. We are still working towards achieving a double-digit growth, but given our resilience and power, India should figure in the world's 'developed nations' list sooner than we dream with some inspiration from our current Finance Minister Pranab Mukherjee who once said: "With strong hearts, enlightened minds and willing hands, we will have to overcome all odds and remove all obstacles to create a brave new India of our dreams.

Source:
http://www.rbi.org.in/home.aspx http://economictimes.indiatimes.com/ http://finmin.nic.in/