Economy of India: Encyclopedia II - Economy of India - Determinants

Economy of India - Determinants

Economy of India - Demographics

India, with a population of 1.027 billion people, is the second most populous country in the world, accounting for nearly 17% of the world's population. Growth rate of population has shown signs of decrease, coming down from a compound annual growth rate of 2.15 (1951–1981) to 1.93 (1991–2001); despite the decrease in the death rates owing to improvements in healthcare.

The large population puts further pressure on infrastructure, social services like education and has magnified socio-economic problems like unemployment, illiteracy, etc. A positive factor has been the large working age population, which forms 58.2% of the total population, which is expected to substantially increase, because of the decrease in dependency ratio. Increased literacy, better healthcare and self-sufficiency in food production since independence, have ensured that a large population has not caused any serious problems.

Economy of India - Geography and natural resources

India's geography ranges from mountain ranges to deserts, plains, hills and plateaus, while its climate varies from tropical in the south to a more temperate climate in the north. 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. India is the sixth largest producer of fish in the world and second largest in inland fish production.

India's major mineral resources include Coal (fourth-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.

Economy of India - Physical infrastructure

Since independence, India has allocated nearly half of the total outlay of the five-year plans for infrastructural development. Much of the total outlay was spent on large projects in the area of irrigation, energy, transport, communications and social overheads. Development of infrastructure was completely in the hands of the public sector and was plagued by corruption, inefficiencies, urban-bias and an inability to scale investment.

India's low spending on power, construction, transportation, telecommunications and real estate, at $31 billion or 6% of GDP, compared to China's spending of $260 billion or 20% of its GDP in 2002 has prevented India from sustaining a growth rate of around 8%. This has prompted the government from opening up infrastructure to the private sector and allowing foreign investment.

Economy of India - Politics

India, a federal republic, has had stable democratic governments since independence. Politics is dominated by the centre-left Indian National Congress (INC), the right-wing Bharatiya Janata Party (BJP), the left-wing Communist Party of India (CPI) and CPI (Marxist) and various regional parties, which are either centre-right or centre-left. Despite the varied political spectrums they occupy, the necessity of forming coalitions for government formation, the growing middle class that generally favours liberalisation and tightening fiscal deficits, especially at the state levels, has meant that all political parties adopt a moderate view towards economic reforms.

Economy of India - Financial institutions

At the time of Independence, India inherited several institutions like the civil services, central bank, railways, etc., from her 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 within the city.

The RBI, the country's central bank was established on 1935-04-01. 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. The Securities and Exchange Board of India (SEBI), established in 1992, regulates the stock markets and other securities markets of the country.

Adapted from the Wikipedia article "Determinants", under the G.N U Free Docmentation License. Please also see http://en.wikipedia.org/wiki