Economy of India
India is a founding member of General Agreement on Tariffs and Trade GATT since 1947 and its successor, the WTO. 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 to trade into the WTO policies.
Indian economy has run a trade deficit every year over 2002 2012 period, with a merchandise trade deficit of US$189 billion in 2011 12.Its trade with China has the largest deficit, about $31 billion in 2013.
India s reliance on external assistance and concessional debt has decreased since liberalisation of the economy, and the debt service ratio decreased from 35.3 Percent in 1990 91 to 4.4 Percent in 2008 09. In India, External Commercial Borrowings ECBs , or commercial loans from non resident lenders, are being permitted by the Government for providing an additional source of funds to Indian corporates. The Ministry of Finance monitors and regulates them through ECB policy guidelines issued by the Reserve Bank of India under the Foreign Exchange Management Act of 1999.India s foreign exchange reserves have steadily risen from $5.8 billion in March 1991 to $318.6 billion in December 2009.In 2012, the United Kingdom announced an end to all financial aid to India, citing the growth and robustness of Indian economy.
Per 2011 census, India has about 330 million houses and 247 million households. The household size in India has dropped in recent years, with 2011 census reporting 50 Percent of households have 4 or less members. The average per 2011 census was 4.8 members per household, and included surviving grandparents.These households produced a GDP of about $1.7 Trillion. The household consumption patterns per 2011 census approximately 67 Percent of households use firewood, crop residue or cow dung cakes for cooking purposes; 53 Percent do not have sanitation or drainage facilities on premises; 83 Percent have water supply within their premises or 100 metres from their house in urban areas and 500 metres from the house in rural areas; 67 Percent of the households have access to electricity; 63 Percent of households have landline or mobile telephone connection; 43 Percent have a television; 26 Percent have either a two wheel motorcycle or four wheel car vehicle. Compared to 2001, these income and consumption trends represent moderate to significant improvements.One report in 2010 claimed that the number of high income households has crossed lower income households.
Since the early 1950s, successive governments have implemented various schemes to alleviate poverty, under central planning, that have met with partial success.In 2005, Indian government enacted the Mahatma Gandhi National Rural Employment Guarantee Act, guaranteeing 100 days of minimum wage employment to every rural household in all the districts of India.In 2011, this Rural Employment Guarantee programme was widely criticised as no more effective than other poverty reduction programs in India. Despite its best intentions, MGNREGA is beset with controversy about corrupt officials, deficit financing as the source of funds, poor quality of infrastructure built under this program, and unintended destructive effect on poverty.ther studies suggest that the Rural Employment Guarantee welfare program has helped in reducing rural poverty in some cases. Yet other studies report that India s economic growth has been the driver of sustainable employment and poverty reduction, but a sizable population remains in poverty.
Unemployment in India is characterised by chronic 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 decline in organised employment due to the decreased role of the public sector after liberalisation has further underlined the need for focusing on better education and has also put political pressure on further reforms.India s labour regulations are heavy even by developing country standards and analysts have urged the government to abolish or modify them in order to make the environment more conducive for employment generation. The 11th five year plan has also identified the need for a congenial environment to be created for employment generation, by reducing the number of permissions and other bureaucratic clearances required.Further, inequalities and inadequacies in the education system have been identified as an obstacle preventing the benefits of increased employment opportunities from reaching all sectors of society.
Child labour in India is a complex problem that is basically rooted in poverty. The Indian government has implemented, since the 1990s, a variety of programs to eliminate child labor. These have included setting up schools, launching free school lunch program, setting up special investigation cells and others.Desai et al. state that recent studies on child labour in India have found some pockets of industries in which children are employed, but overall, relatively few Indian children are employed. Child labour below the age of 10 is now rare. In the 10 14 group, the latest surveys find only 2 Percent of children working for wage, while another 9 Percent work within their home or rural farms assisting their parents in times of high work demand such as sowing and harvesting of crops.
India has the second largest diaspora around the world, an estimated 25 million people, many of whom work overseas and remit funds back to their families. The Middle East region is the largest source of employment of expat Indians. The crude oil production and infrastructure industry of Saudi Arabia employs over 2 million expat Indians. Cities such as Dubai and Abu Dhabi in United Arab Emirates alone have employed another 2 million Indian construction workers during its construction boom in recent decades.In 2009 10, remittances from Indian migrants overseas stood at INR2500 billion US$39 billion , the highest in the world, but their share in FDI remained low at around 1 Percent.
In 1996, red tape, bureaucracy and the Licence Raj were suggested as a cause for the institutionalised corruption and inefficiency.More recent reports suggest the causes of corruption in India include excessive regulations and approval requirements, mandated spending programs, monopoly of certain goods and service providers by government controlled institutions, bureaucracy with discretionary powers, and lack of transparent laws and processes.
The Right to Information Act 2005 which requires 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 and opened up avenues to redress grievances.
In 2011, the Indian government concluded that most spending fails to reach its intended recipients. A large, cumbersome and tumor like bureaucracy sponges up or siphons off spending budgets.India s absence rates are one of the worst in the world; one study found that 25 Percent of public sector teachers and 40 Percent of government owned public sector medical workers could not be found at the workplace Similarly, there are many issues facing Indian scientists, with demands for transparency, a meritocratic system, and an overhaul of the bureaucratic agencies that oversee science and technology.
The Indian economy has an underground economy, with a 2006 report alleging that the Swiss Bankers Association suggested India topped the worldwide list for black money with almost $1,456 billion stashed in Swiss banks. This amounts to 13 times the country s total external debt.These allegations have been denied by Swiss Banking Association. James Nason, the Head of International Communications for Swiss Banking Association, suggests The black money figures were rapidly picked up in the Indian media and in Indian opposition circles, and circulated as gospel truth. However, this story was a complete fabrication. The Swiss Bankers Association never published such a report. Anyone claiming to have such figures for India should be forced to identify their source and explain the methodology used to produce them.
Indian economy retains about 360 million active life insurance policies, the largest in the world. Of the 52 insurance companies in India, 24 are active in life insurance business. The life insurance industry in the country is projected to increase at double digit compounded annual growth rates through 2019, with targets to reach US$1 trillion annual notional values by 2021.
The industry which reported a growth rate of around 10 percent during the period 1996 97 to 2000 10 has, post opening up the sector, reported average annual growth of 15.85 Percent over the period 2001 02 to 2010 11.citation needed In addition, the specialized insurers Export Credit Guarantee Corporation and Agriculture Insurance Company AIC are offering credit guarantee and corp insurance respectively. AIC, which has initially offering coverage under the National Agriculture Insurance Company NAIS , has now started providing crop insurance cover on commercial line as well.citation needed It has introduced several innovative products such as weather insurance and specific crop related products. The premium underwritten by the non life insurers during 2010 11 was Rs 42,576 crore as against Rs 34,620 crore in 2009 10. The growth was satisfactory, particularly in the view of the across the broad cuts in the tariff rates. The private insurers underwrote premium of Rs 17,424 crore as against rs Rs 13,977 crore in 2009 10. The public sector insurers on the other hand, underwrote a premium of Rs 25,151.8 in 2010 11 as against Rs 20,643.5 crore in 2009 10, i.e. a growth of 21.8 Percent as against 14.5 Percent in 2009 10.citation needed
The Indian insurance business has in the past remained under developed with low levels of insurance penetration. Post liberalization sector has succeeded in raising the levels of insurance penetration from 2.3 life 1.8 and non life 0.7 in 2000 to 5.1 life 4.4 and non life 0.7 in 2010.
The Initial Public Offering IPO market in India has been small compared to NYSE and NASDAQ, raising US$300 million in 2013 and US$1.4 billion in 2012. Ernst and Young states that the low IPO activity reflects market conditions as well as slow government approval process and complex regulations. Before 2013, Indian companies were not allowed to list their securities internationally without first completing an IPO in India. In 2013, these security laws were reformed and Indian companies can now choose where they want to list first overseas, domestically, or concurrently.Further, security laws have been revised to ease overseas listings of already listed companies, to increase liquidity for private equity and international investors in Indian companies.