 |
India has struggled financially
since independence, experiencing slow economic growth and economic setbacks due
to climatic extremes or political disturbances. The country has been gradually
transforming its economic base from agrarian to industrial and commercial. Under
British rule in the 19th century, India's cottage industries and thriving trade
were virtually destroyed to make way for European manufactured goods, paid for
by exports of agricultural products such as cotton, opium, and tea. Beginning in
the late 19th century a modern industrial sector and an extensive infrastructure
of railways and irrigation works were slowly built with British and Indian
capital. Nevertheless, India’s economy stagnated during the last 30 or so years
of British rule. At independence in 1947 India was desperately poor, with an
aging textile industry as its only major industrial sector.
Economic policy after independence emphasized central planning,
with the government setting goals for and closely regulating private industry.
Self-sufficiency was promoted in order to foster domestic industry and reduce
dependence on foreign trade. These efforts produced steady economic growth in
the 1950s, but less positive results in the two succeeding decades. By the early
1970s India had achieved its goal of self-sufficiency in food production,
although this food was not equally available to all Indians due to skewed
distribution and occasional shortfalls in the harvest.
In the late 1970s the government began to reduce state control
of the economy, making slow progress toward this goal. By 1991, however, the
government still regulated or ran many industries, including mining and
quarrying, banking and insurance, transportation and communications, and
manufacturing and construction. Economic growth improved during this period, at
least partially as a result of development projects funded by foreign loans.
A financial crisis in 1991 stimulated India to institute major
economic reforms. After the Persian Gulf conflict of 1990-1991 caused a sharp
rise in oil prices, India faced a serious balance of payments problem (its
foreign expenditures exceeded its foreign income). To obtain emergency loans
from international economic organizations, India agreed to adopt reforms aimed
at liberalizing its economy. These economic reforms removed many government
regulations on investment, including foreign investment, and eliminated a quota
and tariff system that had kept trade at a low level. Also, reform deregulated
many industries and privatized many public enterprises. These reforms continued
through the mid-1990s, although at a slower rate because of political changes in
India’s government. In 1993 India permitted Indian-owned private banks to be
established along with a minority of foreign banks.
With the reforms, India made a dramatic shift from an economy
relatively closed to the global economy to one that is relatively open. By
1996-1997, foreign investment had increased to nearly $6 billion, up from $165
million in 1990-1991. Exports and imports also grew dramatically in this same
period. Economic growth since the 1980s has brought with it an expansion of the
middle class, which was estimated to form 20 to 25 percent of India's population
in the mid-1990s. As a result, the demand for consumer goods from soap to luxury
cars has expanded rapidly.
In 1997 India’s annual gross domestic product (GDP) was $382
billion. In 1997 agriculture, forestry, and fishing made up 25 percent of GDP,
compared with 30 percent for industry (including manufacturing, mining, and
construction) and 45 percent for services.
A
Labor The
Indian economy employs 423 million people. The majority of this workforce—64
percent—labors in the agricultural sector. Of the remainder, 20 percent work in
services and 16 percent in industry. Women make up 32 percent of the total labor
force.
Significant numbers of children are employed in India. They not
only perform agricultural tasks such as herding and helping at harvest time, but
they also work in cottage industries such as carpet weaving and match
manufacturing, help in small businesses such as tea stalls, and act as servants
in private homes. Estimates of the number of working children varied widely in
1995, from 14 million to 115 million. This large range in estimates is due in
part to a lack of formal government data on child labor. Child labor is illegal
in India, and efforts have been made to abolish it, particularly in the most
hazardous industries.
Unemployment rates in India are difficult to estimate because
many people work in temporary or part-time jobs. Few workers are permanently
unemployed, but seasonally or marginally employed people such as agricultural
laborers are often underemployed. State and national governments have
established fairly successful rural employment plans that hire labor to build
roads and other public works.
Labor unions are relatively small in India and operate primarily
in public sector enterprises. India's labor laws allow multiple union
representation not only within an industry but even within a factory. Laws also
tend to favor workers' rights over employer prerogatives. As a result there is
an increasing trend in business to hire workers on daily contracts. Older unions
are linked to national trade union federations controlled by political parties.
Since the 1980s, however, there has been an increase in independent unions
unrelated to political parties. Some successful small-industry entrepreneurs
have organized cooperatives. A notable one is the Self-Employed Women’s
Association, which has spread from its base in Ahmadâbâd to other cities.
B
Agriculture
Agriculture, which employs (with
forestry and fishing) about two-thirds of India’s workforce and makes up 25
percent of the country’s GDP, remains the most important sector of the economy.
Most land is farmed in very small holdings: the average holding in the mid-1990s
was about 1.5 hectares (less than 4 acres). About half the land in India is
cultivated by farmers owning more than 4 hectares (more than 10 acres). However,
few farms are larger than 20 hectares (larger than 50 acres) because of limited
land reform. Most Indian farmers, particularly those who own smaller farms,
cultivate their land by hand or by using oxen. India’s agricultural industry
benefited from the government-implemented Green Revolution, which encouraged the
use of high-yielding crop varieties, fertilizers, and carefully managed
irrigation. The Green Revolution took hold in the 1970s and has resulted in a
steady growth in production of food grain. Agricultural production faces
occasional declines because of irregular monsoons or other climatic problems.
These declines disrupt the economy and spur inflation.
India’s most important crops include sugarcane, rice, wheat,
tea, cotton, and jute. Other important cash crops include cashews, coffee,
oilseeds, and spices. Another central feature of India’s agricultural economy is
the raising of livestock, particularly horned cattle, buffalo, and goats. In
1998 the country had 209 million cattle, substantially more than any other
country. The cattle are used mainly as draft animals and for leather. As farmers
increasingly use machinery, the number of livestock they raise will probably
decrease. Buffalo is the main animal used for producing milk and dairy products.
Milk production and distribution has increased dramatically in the 1990s because
of a nationwide, government-supported cooperative dairy program. Sheep are
raised for wool, and goats are the main meat animal. Many Indians, particularly
Hindus, refuse to eat beef for religious reasons, although they eat other meat,
eggs, and fish.
C
Forestry and Fishing Although
relatively undeveloped on a national scale, large-scale commercial fishing is
vital to the economy in certain regions, such as the Ganges delta in West Bengal
and along the southwestern coast. Small-scale fishing is widespread, taking
place in oceans, lagoons, rivers, ponds, wells, and even flooded paddy fields;
these fish are typically sold in street markets. In recent years the government
has encouraged deep-sea fishing by building processing plants and giving aid to
oceangoing fleets and vessels. Local, more traditional fishers protest this
encouragement because they see it as a threat to their livelihood. In 1996 the
government recorded an annual fish catch of 5.3 million metric tons, about half
of which was marine species. In 1996 fishing contributed 1.2 percent of India’s
GDP.
Forests cover 22 percent of India’s total land area. The area of
land planted in trees has increased steadily since 1990 due to government and
commercial plantation schemes. However, in the 1990s trees large enough for
lumber production were harvested at a rate faster than they could regenerate.
Loss of topsoil in harvested areas as well as forestland lost to development and
agriculture have also contributed to India’s difficulties achieving sustainable
timber harvests. Industrial timber species include teak, deodar (a type of
cedar), and sal. Products such as charcoal, fruits and nuts, fibers, oils, gums,
and resins are among the most valuable commodities from India’s forests.
D
Mining India
ranks among the world leaders in the production of iron ore, coal, and bauxite,
and it produces significant amounts of manganese, mica, dolomite, copper,
petroleum, natural gas, chromium, lead, limestone, phosphate rock, zinc, gold,
and silver.
E
Manufacturing The
government’s push for industrialization beginning in the late 1950s gave India a
diversified and substantial manufacturing sector. Industrial production has
steadily increased since that time, accelerating in the 1980s and 1990s.
Important industries include textiles, iron and steel, food products, electrical
machinery, transportation equipment, and nonferrous metals. India also is a
significant producer of fertilizer, refined petroleum products, chemicals, and
computer software.
India manufactures a large proportion of its own requirements
for aluminum, copper, machine tools and heavy electrical equipment, artificial
fibers and plastics, vehicles of all kinds from bicycles to trucks and railway
engines, and pharmaceuticals, chemical products, home appliances, and
televisions. Annual production of passenger cars went from 47,000 in 1970-1971
to 414,200 in 1995-1996. Bicycle production went from 2 million to 9.4 million
in the same period. High-technology items such as computers are manufactured in
collaboration with foreign companies. In the 1990s India's computer software
industry expanded enormously.
F
Energy Energy
is the keystone of India’s agricultural and industrial development. India’s
energy is heavily dependent upon coal. In 1995 coal provided nearly 65 percent
of India’s primary energy needs. The next most important energy source was
petroleum (18.6 percent), followed by hydroelectricity (8.9 percent) and natural
gas (8.2 percent). Nuclear power contributes only 1 percent of the country’s
primary energy needs. Thermal plants, principally burning coal, produce 82
percent of India’s electricity. Hydroelectric plants generate 15 percent, while
nuclear power supplies the remainder. In the mid-1990s India imported slightly
more than half its energy needs, particularly crude oil and petroleum products.
In order to meet its high energy demands, the Indian government planned in the
mid-1990s to more than double the number of oil refineries and nearly double the
number of nuclear reactors. It also sought to increase renewable, alternative
energy sources such as wind and solar energy.
G
Services and Tourism
In 1997 service industries,
including transport, trade, banking and insurance, real estate, and public
administration and defense, accounted for 45 percent of GDP. Retail and
wholesale trade are important to India’s service economy. Major cities, such as
Mumbai and Calcutta, are centers of such trade. Government service is also very
important. India’s government provides many social services to its population,
particularly in the fields of education, health, and public administration.
Tourism is another significant part of India’s service economy.
In 1997, 2.4 million tourists visited the country. Foreign exchange earnings
from tourism were more than $1.3 billion that year. The bulk of India’s tourists
come from Bangladesh and Pakistan. Other major countries of origin include
United Kingdom, the United States, Sri Lanka, Germany, France, and Japan. Among
India’s attractions are the more than 20 locations designated by the United
Nations Educational, Scientific and Cultural Organization (UNESCO) as World
Heritage sites. Most foreign tourists visit a few tourist sites, such as the Taj
Mahal and other monuments in Âgra; the "pink city" of Jaipur, known for its
pink-hued architecture; and Delhi, with its magnificent Red Fort and many
museums. Other tourist destinations include the rock-cut caves of Ajanta and
Ellora, the temples at Khajurâho, and the beaches in Kerala, as well as cities
such as Mumbai, Calcutta, Chennai, New Delhi, Vârânasi, and Udaipur.
H
Transportation India
has a network of railroad lines that covers the entire country. The network is
the largest in Asia and one of the largest in the world. All railroad lines are
publicly controlled. In 1996 the length of operated track was 62,725 km (38,976
mi). The system carried 3.9 billion passengers and 365 million metric tons of
goods annually in the mid-1990s.
By 1996 there were 3.3 million km (2.1 million mi) of roads in
India, of which 46 percent were paved. National highways make up about 2 percent
of the total road length and carry about 40 percent of road traffic. Each state
operates a publicly owned bus company. The major Indian ports, including
Calcutta, Mumbai, Chennai, Cochin, and Vishâkhapatnam, are served by cargo
carriers and passenger liners operating to all parts of the world. To keep up
with increased foreign trade, port facilities have been modernizing and
expanding. India has a large merchant shipping fleet, about half of which is
publicly owned under the Shipping Corporation of India. A comprehensive network
of air routes connects the major cities and towns of the country. As part of the
1991 economic reforms, India opened up domestic air service to private airlines
for competition with publicly owned India airlines, with a result of increasing
air service.
I
Communications The
government-controlled postal services remain the backbone of India's
communication industry, handling billions of letters and parcels each year. The
post office also transmits money orders in large amounts, serving particularly
workers sending home part of their pay, and has a large number of savings
certificate programs that serve the same population. The telephone system has
expanded at a rapid rate since the mid-1980s. India had 19 main telephone lines
per 1,000 persons in 1997, compared with 643 for the United States. In the 1990s
a major program to create "public call offices" that can handle domestic and
international long-distance calls brought telephone service to a broad range of
the public in all parts of the country. About 90,000 public call offices had
been established by the mid-1990s in small towns and even at small roadside
locations.
About 34,000 newspapers are published in India, 10 percent of
them dailies, including a number of English publications. The Times of India,
the Indian Express, and others publish from multiple cities; other
notable papers include the Hindu, Deccan Herald, and the Statesman.
Newspapers are privately owned in India.
In the mid-1990s the Indian government opened up the once solely
publicly owned radio and television broadcasting industries to competition.
Since the early 1990s there has been an exponential growth in television
viewing, spurred in part by the spread of private cable systems and television
broadcasts via satellite that bring news, sports, and entertainment from around
the globe. At least 50 million television viewers in India also watch television
programs from Pakistan.
J
Foreign Trade India
experienced fluctuation in its foreign trade in the 1990s. In 1990-1991, during
the economic crisis that helped to trigger the 1991 economic reforms, India
recorded $27.9 billion in imports and $18.5 billion in exports. After the
reforms, India’s foreign trade improved. In 1996 India had $37.4 billion in
imports and $33.1 billion in exports. Asia, including the Middle East, accounted
in the mid-1990s for 41 percent of India's export trade and 44 percent of its
import trade. Western Europe accounted for 29 percent of exports and 34 percent
of imports, and North America (almost entirely the United States, which is
India's largest trading partner), 20 percent of exports and 14 percent of
imports. Major imports in the mid-1990s included petroleum, machinery, gems,
chemicals, iron and steel, and fertilizers. Other major imports included
newsprint, cooking oil, coal, and medicinal and pharmaceutical products.
Principal exports were gems and jewelry, engineering goods, textiles, chemicals,
and agricultural products. Other major exports included ores and minerals,
marine products, leather, handicrafts, and carpets. Electronics and computer
software exports in 1994-1995 had more than doubled over 1992-1993 figures,
reaching 1.7 percent of the total number of exports.
K
Currency and Banking
The Reserve Bank of India, founded
in 1935 and nationalized in 1949, operates as India’s central bank and sole bank
of issue. The rupee, India's basic monetary unit, is divided into 100
paise (36.31 rupees equal U.S.$1; 1997 average). The central government's
Ministry of Finance and statutory bodies such as the Security and Exchange Board
of India also help control the financial sector. The banking system is largely
controlled by the government, although economic reforms have opened the banking
industry to some private competition.
There are 23 stock exchanges in India. The largest is the Bombay
Stock Exchange in Mumbai. Founded in 1875, the Bombay Stock Exchange is the
oldest in Asia. Another major stock exchange is the National Stock Exchange,
founded in 1994 in New Delhi.
|
