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Friday, 1 July 2011

Indian Economy


Indian Economy has covered a long ground since it was liberalized in 1991. Today, India has the fourth largest economy in terms of purchasing power parity (PPP) behind only the USA, China, and Japan. It is slated to overtake Japan and become the third major economic power in the next ten years. India is also one of the few markets in the world which offers high prospects for growth and earning potential in practically all areas of business. Indian economic growth has been among the fastest in the world in the recent years.
India was a highly protected, semi-socialist autarkic economy till 1991. There were numerous structural and bureaucratic impediments in setting up a new business and foreign investment was not welcomed. The opening up of the Indian economy in 1991, unleashed the latent entrepreneurial talent of the Indian and in less than two decades India has established itself as the next economic superpower of the world.
Indian Economy grew at an annual average growth of 7.6 per cent during the Tenth Plan and has set a target of 9 per cent for the Eleventh Five Year Plan. One of the landmark structural changes achieved by Indian economy is that today services sector contributes more than 50% of India's GDP, which is a general characteristic of any developed economy. For the financial year 2006-07, the share of services, industry, and agriculture in India's GDP was 55.1 per cent, 26.4 per cent, and 18.5 per cent respectively. 
One of the notable features of economic growth in India is the sharp rise in the rate of investment in the economy. Investment, in general being a forward looking variable, reflects a high degree of business optimism. The sharp increase in investment rate has sustained the industrial performance and reinforces the outlook for growth. 
The rapid economic growth of the last few years has put heavy stress on India's infrastructural facilities. The shortage on infrastructure front such as power shortfall, port traffic capacity mismatch, poor road conditions, and low telephone penetration threaten to derail Indian success story. Apart from addressing the above problems some other steps such as labour reforms and administrative reforms need to be taken urgently if we have to sustain higher levels of economic growth. The government also needs to ensure that the economic growth is equitable as lopsided economic growth may result in social unrest and may undo all the good work achieved as a result of economic reforms.

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