Business and Economics
Abbreviated as IND by abbreviationfinder.org, India is one of the countries with the highest economic growth over the last two decades. In terms of GDP, the country now ranks tenth in the world. However, about a quarter of the population still lives in severe poverty. Agriculture still employs more than half the population but accounts for just over one sixth of GDP. There, production growth is slow, even during “good” years, when the weather is normal. Industry and construction account for 23 percent of GDP, and since 2000 industrial production has grown by almost 7 percent per year. India’s economic development is driven even more by the service sector, which contributes 62 percent to the country’s GDP. In particular, service exports have developed positively.
When India became independent in 1947, it was a very poor agricultural country with a small industrial sector. Mainly products were made of cotton and jute as well as simple consumer goods for households. There was also a very small iron industry, but all machines had to be imported. In the new country, economic development was guided by five-year plans and the large state-owned companies would play the strategic role in the country’s industrialization. In the 1960s, a machine and tool industry emerged and gradually domestic production was able to replace imports for more and more goods. The industry became increasingly versatile while foreign trade was very small. Business was protected from foreign competition through high tariffs and stimulated by subsidies, but in most cases the operations were characterized by low technology and low efficiency. Through a tight regulatory framework, the state controlled the development of business.
Deregulation and increased transparency
At the end of the 1980s, liberalization and liberalization began slowly, and 1991 can be set as a breaking point for development policy. Since then, the governments’ stated goal has been for the country to become increasingly linked to the global business community and for private enterprise to have increased opportunities. Various parts of the economy have gradually been opened to foreign capital, operations have been modernized and foreign trade has increased significantly. However, the state still plays an important role in business. Small-scale operations, largely in the informal sector, are also of great importance, mainly for employment, and traditionally the Indian state has promoted small-scale entrepreneurship.
However, this endeavor to open the country’s economy encountered considerable difficulties in the beginning. Productivity in Indian companies was far below the international level, and overseas, Indian industry was considered to be technologically lagging and slow to adopt new technology and improved design. It was until the late 1990s before internationalization really became noticeable. Especially since 2005, foreign ownership has increased in Indian large companies and foreign large companies have established themselves in India. It has also since been a period when foreign trade increased more than in most other countries. But India’s foreign trade is still small; it accounts for only 1.5 percent of world trade (for China, the share is close to 9 percent).
Growing middle class
A growing middle class means an increasing demand from hundreds of millions of customers. This means that the country is not as sensitive to global recession as the more trade-dependent competitors in the world market. In addition, India’s banking system is relatively little connected to the outside world. The country was therefore not affected as much by the global financial crisis of 2008-09 as many other countries, and in 2010 the Indian economy grew by just over 10 percent.
Uneven economic development
However, in the last twenty years the business sector has not changed as thoroughly as in China. The Indian government’s large programs have been implemented in small steps and only to a limited extent. The most important challenge in the 2010s is to raise many millions of poor to poor living conditions. In the country’s development policy, there is a strong emphasis on growth for everyone, but wealth inequality has grown within the country. Conditions for the poorest have hardly improved. For a long time, there have been differences in the level of business development between different parts of India, and they have been accentuated in recent years as the states have gained greater self-determination. Regions with strong economy and efficient management – Southern and Western India as well as the Delhi region – have a more modern and more diverse business sector than the states of the East,
A major obstacle to a more active reform policy has been serious corruption scandals that have taken time and energy to sort out. Added to this is the energy shortage, inadequate transport systems, complicated bureaucracy and other institutional complications. In the early 2010s, India’s future role is believed to be in, among other things, resource button (frugal) technology, e.g. with cheap, energy-efficient vehicles, simple medical devices, cheap but legal drugs, ie. products of great importance also to other countries and perhaps mainly countries that are not financially strong. The major challenge will be to create jobs for the low-skilled and to find capital for domestic technological research.
The economic growth and widening of the business sector that has taken place in recent decades has meant that India can no longer be considered an agricultural country. In 2019, 15 percent of the country’s GDP came from agriculture, forestry and fishing, but still more than half of all employed in agriculture. This is in large parts of the country a small-scale, largely self-sustaining arable farm that is run in a traditional way. At the same time, in areas with good growing conditions and proximity to the market, there is a modern and fairly efficient agriculture that grows for sale.
When India became independent, agriculture was completely undeveloped and could not produce the surplus needed to feed the urban population. The country then imported a tenth of the basic foodstuffs and the most important task was to increase food production at least in line with the very rapid population increase. More land was cultivated and the irrigation was expanded. International research produced new high yield variants (HYV) of mainly rice but also of wheat and millet and this resulted in increasing cereal crops (the “green revolution”) in some parts of India. The new variants required artificial fertilizers and safe access to water, ie. irrigation, and self-sufficient farmers could get favorable loans to be able to embrace the new crops. During the 1980s and early 1990s, agricultural production increased by close to 4,
Since then, however, agricultural production has been variable and unpredictable. Indian scientists and politicians expect an annual increase in agricultural production of at least 4 percent if the country is to maintain desirable economic growth. Even during good years in recent years, the increase in agricultural production has not been greater than just over 3 percent and there have been years with only a one percent increase. This is partly due to the deteriorating economic conditions for many farmers, but mainly due to whimsical weather conditions.
About 55 percent of India’s land can be used for arable land, but much of the agricultural land has low natural fertility. It has also deteriorated in recent times, as strong population pressure has led to erosion and other soil degradation. Flooding has resulted in leakage of nutrient salts inland and salinization in coastal areas. The best conditions for agriculture are found in Punjab and Haryana in northwestern India and in the delta areas of east and south.
About two-thirds of agricultural production consists of basic foodstuffs, mainly rice, wheat, maize and millet. This includes protein rich legumes, mainly peas, lentils and beans. India is the world’s second largest producer of rice and wheat in the world and one of the largest in vegetables, fruits, cotton, tea, oilseeds and jute. For the vast majority of crops, the area yield is significantly low. In rice, it is only half as high as in Vietnam and Indonesia and one third of what it is in China.
Cultivation and area yield are mainly determined by the availability of water. For good harvests, it is either necessary that the rain comes on time and in sufficient quantity or that the natural precipitation is supplemented by irrigation. Generally, there are two growing seasons in India. The summer monsoon provides abundant rain for a few months in most regions, and especially rice is grown. During the drier part of the year wheat, legumes and root vegetables are mainly grown. Especially in the central part then falls so little rainfall that it can not be counted as a second growing season. In areas with low annual rainfall, the rain is unreliable. There, misgrowth can occur 1-2 times every five years. This risk can be reduced through irrigation, but in poor areas there have been no resources to build such facilities. There, the successes of the green revolution have not been copied. In 2005, 45 percent of the cultivated area was irrigated, mainly in northwestern India and in river valleys and delta areas.
So far in the 2000s, India has been importing basic foods only for a few years and then mainly to replenish the grain stocks. Food shortages cause rapidly rising inflation, and to cushion it during years of small harvests, large buffer stocks are used. However, the fact that no imports are needed during normal years does not mean that the country’s agricultural production is sufficient for all residents to be saturated. Millions of people, at least periodically, lack money to be able to buy enough food in the market. Poor harvesting also means for many farmer households that their own harvest is not enough for the whole year.
The current rural policy is focused on large state investment in irrigation and measures to stop land degradation. The farmers’ contacts with the market should be improved by giving all villages a road connection. A radical measure to get larger grain stocks is considered to be building better warehouses; it is estimated that 40 percent of the stored grain is destroyed by rodents or rot away. A government proposal aims to raise farmers’ incomes by shortening the path between farmer and consumer. There are usually a number of different middlemen who take most of the product’s sales price. A simplification would be positive for the peasants but make millions of traders in the middle line unemployed. The proposal has been met by large counter-demonstrations in the cities.
For the Indian small farmers, arable farming and livestock farming are equally important parts. A few cows or buffaloes not only provide milk and eventually meat. They are used as draft animals and their fertilizers are dried for fuel. Sheep and goats are also common, as are poultry. Sales of milk and eggs provide the farmers with ongoing income and it has become common with sales cooperatives in the villages to facilitate this. Milk production has increased significantly and India is now the world’s largest dairy producer and one of the largest in egg and poultry meat. Hides, wool, honey and fish are also by-products of agriculture. In India, there are also specialized livestock and poultry breeding on a large scale.
Forestry accounts for less than one percent of employment and GDP, and it covers a small part of the country’s need for raw materials for the forest industry. But most Indians are highly dependent on the forest as a resource. The country has the world’s largest consumption of firewood, and about 80 percent of rural households and half of urban households use only such fuel. The original forest is very rich and from there are also obtained from for example natural rubber, medicinal plants, roofing material and incense. Nearly half of the revenue from the forest is estimated to come from other than timber, and of all harvesting, only one tenth is estimated to go to the forest industry, primarily to sawmills.
The forest areas are still the habitat for more than 200 million Indians, especially for tribal people (scheduled tribes). In most such areas, locals have minimal rights to land and assets in the forest. Especially in nature protected areas, they lack recognized rights and have a very unsafe living. Such abuses have become a breeding ground for left-wing extremist resistance movements, including in the state of Odisha (Orissa).
During the 20th century, the original forest declined at an ever faster rate. This was partly because the growing population needed more fuel and agricultural land, and partly because the state used increasingly larger areas for mines, dams and other facilities. The remaining forest also deteriorated to its quality. The forest had its smallest extent during the 1980s. Since then, the Indian state has increasingly safeguarded forest assets. The forest is traditionally owned by the state and the states. A few percent have been sold to mining companies. Almost one third of the state forest is managed in collaboration with the municipalities. A few percent of the forest is owned locally, but the ownership conditions can be very unclear at the local level.
During the 00s, the forest area increased, from 17 percent of the total land area in 2001 to 23 percent in 2011. Of this, nine-tenths are continuous, densely forested areas. About one fifth of the forest area is located in the state of Madhya Pradesh in central India. Data on forest land changes are now obtained through inventories from satellites, which are carried out every other year. They do not provide data on the quality of the forest, but it is estimated that more than 40 percent of all forest land is degenerated as a result of over-taking and neglect. Both forest companies and farmers continue to cut down original forest, in violation of national laws and local regulations.
When the forest disappears from hilly areas, erosion increases and the soil deteriorates. The landscape gradually becomes drier and thus less suitable for agriculture. Shrinking forest land also means that less carbon dioxide is bonded, which aggravates the greenhouse effect. India is one of the ten states with the largest carbon dioxide emissions and in the international climate negotiations it is important for the country to show how much effort is being made to offset the emissions. This is especially evident in extensive forest planting programs. Forests are abandoned for abandoned mines and destroyed mangrove areas, re-established forests in barren areas near the villages, plant trees along roads and canals and develop agroforestry (tree farming). When larger areas are planted with trees for modern forestry, it usually occurs with fast growing, non-native tree species such as acacia and eucalyptus. In 2010, large funds were allocated to increase the forest area and to develop sustainable, large-scale forestry. The forest has received financial value and private forest companies have been given greater opportunities to get involved. In recent years, large forest areas have also been designated as nature conservation areas.
However, these programs may conflict with another state measure to safeguard forest resources. In 2006, the Forest Rights Act (FRA) was adopted, which aims to give the local people responsibility for the care of the forests and give them greater security in daily life. The law recognizes the right of individuals and villagers to forest land that they have used for generations. After applying for such a right and being granted it by the state authorities, they gain both power over the forest’s resources and the responsibility for long-term management with them. Such “social forestry” should also mean that degenerated forest is rehabilitated and threatened ecosystems receive support. This will gradually increase the supply of fuel and timber for households in the village and also improve the local climate. The tribes will also have a safer position; they have traditionally been disadvantaged in Indian society. Four years after the law came into force, some land requirements had been recognized in some states, for example in Odisha (Orissa), while nothing happened in some other states.
The Indian Ocean around India’s coasts has huge assets on seafood, and fishing is a industry that has shown strong growth in recent years. The annual production increase in 2010-12 was 7 percent, and fishing accounts for 1-2 percent of the country’s GDP. Sea and freshwater fishing provides just over 2/3 of all catches, while the remainder comes from fish farms in ponds and along the coasts.
Fishing and shellfish are mostly operated on a small scale by individual full-time and part-time fishermen, and there are also local fishing cooperatives. In coastal areas, nutrition is of great importance for survival and employment. Fishing and related activities, such as the manufacture of gear and boats, processing, transport and trade in fish, are estimated to employ more than 14 million people. Traditionally, catches have stopped in the local market, as the climate and poor transport conditions mean that the fish cannot be kept fresh.
Along the coasts fish are mainly sardines, mackerel and anchovies. Most important, however, is the catch of seafood, especially shrimp. There may be a risk of overfishing in coastal areas, and the authorities therefore support the modernization of the fish, so that fishermen have the opportunity to move over larger areas. There is a great potential in fishing further out at sea. Over the past decade, the state and the states have also made important connecting investments: modernizing the major fishing ports, building refrigeration facilities and developing refrigeration transports. The state is also investing in the fish processing industry, which will partly export more expensive fish products, and partly meet expected new domestic demand for semi-finished products and ready-to-eat fish dishes from the growing middle class.
Freshwater fishing in rivers and reservoirs and in ponds in the agricultural landscape is relatively important and accounts for 10-15 percent of all catches. Some more comes from fish farms along the coasts. In the last decade, production from fish farms in particular has increased greatly. India now has the second most extensive aquaculture industry in the world after China. In freshwater ponds mainly carp are grown, but in recent years giant prawns have also become common. More than half of Indian shrimp exports come from farms in brackish water along the coasts. Around 2010, seafood exports increased by 20 percent annually. It consists mainly of seafood and the most important customer is Japan.
India’s fishing industry is expected to have bright prospects, with growing demand both within the country and from other countries, with large resources at sea and great opportunities for increased aquaculture. It is being modernized and it is bringing about changes in local communities. This means a deterioration for millions of fisheries households as traditional supply options disappear for them.
India has large assets in several minerals that are very important in an industrial society, especially iron ore, bauxite, chromium, titanium and manganese. Until the 1990s, mining was mainly small-scale and operated inefficiently and using traditional methods. The liberalization of business that followed meant that more and more foreign ownership was allowed, thereby raising capital, technology and entrepreneurial expertise. Since 2006, foreign wholly-owned has been permitted in all mining operations except for the extraction of uranium. However, wholly or partly state-owned mines still account for close to three-quarters of the total production value in the mining sector. Very large foreign multinational mining companies have shown great interest in getting involved in India, especially since the mid-00s.
The economic importance of the mining industry has increased and in 2011 it accounted for 2.5 percent of the country’s GDP. Well-known and valuable mineral resources are found in most states, especially in southern and central India. However, mining is rare in the inner Ganges Valley and on the southern slopes of the Himalayas.
India has extremely good iron ore assets, both in quantity and quality, especially in Odisha (Orissa) but also in Andhra Pradesh, Karnataka and Goa. The ore is unpolluted, which makes it in high demand in the world market. Iron ore extraction increased at the same high rate as industrial production in India during the 1990s, and the country has been self-sufficient with ore to the steel mills and also exported iron ore. However, in 2011-12 production decreased by one fifth. This was due to the fact that the state governments of Goa and Karnataka closed many mines where illegal mining or non-compliance with environmental legislation was closed.
India is the world’s fourth producer of bauxite, found in most states of southern and central India. Aluminum is produced from bauxite by electrolysis, which is a very energy-intensive process. The uncertain and insufficient supply of electricity is therefore a major problem. Despite this, India is almost self-sufficient with aluminum. Semi-manufactured alumina is the third most important mineral export commodity.
Copper is mainly mined in Jharkhand, Rajastan and Madhya Pradesh, and production corresponds to half the raw material demand at the country’s copper refineries. The remainder is imported, and India is self-sufficient with refined copper. Occurrences are also found in the Himalayas, mainly in Sikkim, but there are poor transport conditions and lack of electricity so far as to prevent mining. Lead and zinc occur in many states. India is the fifth largest producer of zinc in the world and exports some of it, and it also ranks fifth in terms of manganese and titanium extraction. There are also large assets in industrial minerals, such as limestone, which is the raw material for one of the world’s most extensive cement industries.
In foreign trade, diamonds play an important role, partly those that are mined in the country and partly those that are imported, processed and then exported. More than 70 percent of the value of mineral exports in 2010-11 was made up of processed diamonds. Diamonds are mainly mined in Madhya Pradesh. India has become perhaps the world’s most important diamond processing center and in Mumbai (Bombay) there is a diamond exchange. Also, gemstones are mined, processed and exported. In the past, a lot of gold was mined, but the assets have degraded and now gold is mainly produced in Karnataka. In India, there is traditionally a great demand for jewelry gold and gold is now being imported.
Still, 80 percent of all minerals are mined in open quarries, but the deposits are gradually shrinking. Extensive geological investigations are underway with modern methods to find deposits at greater depths in the surroundings. Ore clearing and mapping are also important in remote regions and offshore. The growing global demand for iron ore and also other minerals has meant that it is not uncommon for illegal mining, both by state and private companies. The big mining companies want to expand the mining and also open new mines, but in recent years this has met with great resistance in some states, especially in Odisha (Orissa). Unclear ground conditions and the local population’s fear of severe environmental degradation cause serious conflicts.
The rapid economic development of the last decade has increased the pressure on India’s energy sector, and continued growth requires an increased and safer supply of electricity. Since the end of the 1990s, the problems with electricity supply have increased and power cuts are commonplace. However, about 300 million Indians still lack electricity. The extraction of both coal and oil and natural gas does not increase at a desirable rate at all. This means that every year more and more imports of energy raw materials are required, which is increasingly burdening the trade balance. Therefore, India has ambitious plans for increased use of renewable energy.
Since then, the state has played an entirely dominant role in the energy sector. The liberalization of recent decades has led to the fact that there are now joint ventures as well as completely private domestic players in the extraction, transport and distribution of energy. Coal of India Ltd. (CIL) with subsidiaries, however, still accounts for more than 80 percent of coal extraction, and corresponding federal and state commitments exist in oil and natural gas extraction and transportation.
About 70 percent of India’s entire energy consumption at the end of the 1990s came from fossil fuels (40 percent from coal, 24 percent from oil and 6 percent from natural gas) and just over 29 percent from renewable energy sources (including 2 percent from water energy) and just under 1 percent from nuclear energy.
India is the world’s third largest producer of coal, but the assets are of varying quality. Occurrences are found in the eastern and central parts of the peninsula, mainly in the states of Jharkhand, Odisha (Orissa), Chhattisgarh and West Bengal. In addition, lignite is extracted in southern Tamil Nadu. Coal production increased for a long time, but during the 00’s no longer at the same rate as the country’s economic growth. Consequently, imports have therefore increased from high-quality coal for use in the steel industry as well as from low-grade coal to the thermal power plants. Around 2010, production growth completely stagnated.
More than 80 percent of the coal mining takes place in open quarries, which entails major interventions in the landscape. The unusually high content of ash also causes pollution of air and water. To a large extent, CIL still uses primitive technology and is considered to be permeated by corruption and severely affected by thefts. In order to increase production, mining companies are now seeking land rights to open new open quarries in low-lying areas, but these are often very controversial projects. This may include mining in areas with strong protection for endangered animals such as Bengal tigers, leopards and elephants. It is also common for applications to cover areas assigned to tribal population. Also plans for expanded mining and forest clearing to build connecting roads,
Oil and natural gas have been mined in the Arabian Sea since 1974, 160 km west of Mumbai (Bombay). In 2011, this area accounted for 44 percent of India’s entire oil production and also for a significant portion of the natural gas that is also extracted in the country. Oil fields are also found in the Bay of Bengal and on land in Rajasthan. Oil production has remained at almost the same level since 1995; old fields have deteriorated and new ones do not produce the expected increase in production. Demand for oil from the industrial and transport sectors is growing strongly each year and in 2011 80 percent of the oil demand was covered by imports.
In 2002, the country’s largest natural gas deposit (Krishna-Godavari) was discovered offshore off the east coast of Andhra Pradesh. Neither has they reached the expected production level, and more and more natural gas has to be imported to meet growing demand from the thermal power plants. Large occurrences of shale gas have been found in West Bengal and these are probably also found in Gujarat, but the extraction is very costly and is not included in the energy plans for the next decade.
In 2012, India had seven nuclear power plants with a total of 13 reactors in operation, and a few others were almost ready to be put into operation. The small domestic deposits of uranium are used in the nuclear industry, while nuclear plants use enriched, imported uranium. Nuclear power plants are located in southern and western India.
In 2012, coal accounted for just over 57 percent of electricity and natural gas for 9 percent. Nearly 19 percent were water energy and 12 percent came from other renewable sources. Nuclear energy accounted for just over 2 percent and oil accounted for only half a percent of electricity. The increasing problems with the electricity supply in recent times have meant that very large power plant projects are planned and built. The water energy potential on the Himalayan slopes is one of the largest in the world, but an expansion there is extremely difficult and costly. Moreover, such huge projects are very controversial, as they mean that hundreds of thousands of people have to be moved to completely different areas. In addition, several rivers in the north have their lower reaches in other states. Dust and power plant construction in the upper parts brings to life serious conflicts over water with Pakistan in particular. The energy planning in a number of states contains many small power plant projects that are needed when electrifying remote villages.
India is the world’s fifth largest wind energy producer, accounting for 6 percent of electricity in 2010. The greatest potential exists in southern and western India and the greatest importance is the wind energy in the state of Tamil Nadu. In the long term, the potential is also very high in terms of solar energy, which is also a suitable energy source in rural areas in the southwest. So far, the construction costs there are considered to be too high and solar energy is mainly generated in Gujarat. By far the most important renewable energy source in India is firewood and other biomass, which is used by households across the country.
Industry and service
Since the mid-1990s, the industry has shown stronger growth in India than in almost all other major countries. Industrial production grew in 2000-07 by more than 9 percent annually. After a decline of just under 4 percent, it returned to the previous level in 2010 and was then subdued again. In 2010, the industry accounted for almost two-thirds of export earnings.
Up to the 1990s, most of the industrial production took place within a number of large, state, commodity processing companies and within some very large, family-owned conglomerates. In addition, local small industries as well as craftsmanship were widely used. Due to high tariffs, operations were protected from foreign competition.
The liberalization that first began to be felt in the latter part of the 1980s has meant progressively lowered barriers to trade and liberalization. It has forced companies to embrace innovations from the outside, improve product quality and change management and corporate structure. At the same time, the companies have benefited from the very large availability of low-paid labor. Gradually, more and more industries were opened for foreign direct investment. In seven special economic zones for export-oriented manufacturing (EPZ), most in connection with major ports, total tax exemption for foreign companies and good infrastructure is provided. There are mainly canning industry and manufacturing of electronics, jewelry and textile products.
Within a number of industries, industrial companies with globally competitive production have emerged, primarily in the automotive, pharmaceutical and engineering industries as well as the chemical industry. India also has a large defense industry and has developed advanced military equipment, even in the field of nuclear weapons. Indian companies have also established themselves abroad, first in other developing countries and in the last decade also in North America and Western Europe.
The industrial structure is more heterogeneous in India than in many other countries. Here you will find all types of companies, from multinational conglomerates and large joint ventures to a large number of small workshops with craftsmanship in the informal sector. This also usually applies to capital-intensive industries such as the chemical and metal industries. Statistics are available for the modern organized industrial sector with units with at least ten workers and with energy-driven manufacturing and for companies with at least twenty employees and manual production. The companies in this category account for most of the industry’s production value. However, the smaller companies account for a significant part of employment and a large part of them are in the informal sector. In the closed economy until the 1990s, the small companies received subsidies and other government support. Since then it has become less and less of it. At the same time, a small-scale subcontracting business is flourishing, mainly with manufacturing for export companies.
India’s steel industry was the world’s fourth largest in 2011-12. About three quarters of the production comes from private companies, among which Tata Steel is the largest. It is the seventh largest steel industry in the world with manufacturing in 26 countries. Early on, a diverse engineering industry emerged, with an emphasis on heavy industry. As early as 1970, Indian companies were able to manufacture most of the products needed in the country. Nowadays, production of transport equipment, construction equipment and factory equipment, products that are also exported, are mainly noticed in other developing countries.
Since the mid-1990s, a number of large, foreign car companies have established manufacturing in India, and the automotive industry was the industry that showed the greatest growth during the 1990s. A strong domestic demand meant that the Indian car industry was not hit so hard by the recession in 2008-09, and in 2012 India was one of the ten largest car manufacturers in the world in terms of passenger cars and light trucks. Maruti Suzuki then had 45 percent of the domestic market, followed by Hyundai and Tata Motors with 13-14 percent each. Hero Motocorp is the world’s largest manufacturer of scooters and motorcycles. The automotive industry is concentrated in the three largest metropolitan areas of Chennai (Madras), Delhi and Mumbai (Bombay), including Pune. It produced just over 11 million vehicles in 2011, of which just over 75 percent were two-wheeled motor vehicles, 16 percent passenger cars and the remainder three-wheeled vehicles and trucks. At that time, more than 13 million people worked in Indian vehicle and vehicle component manufacturing. Exports mainly comprise small, fuel-efficient and cheap passenger cars.
The food and textile industries are the industries that have the largest share of the industrial employed. About 35 million work in the textile industry. Above all, cotton fabrics and cotton garments are manufactured and almost 40% of all production is exported.
The chemical industry is one of the most important industries in India’s economy, as it generates ever-growing export revenue, mainly through sales of pharmaceuticals and oil products from refineries. In 2012, the pharmaceutical industry was the world’s third largest in terms of production volume. So far, almost exclusively but internationally legal variants of simple medicines for infectious diseases, asthma and high blood pressure have been manufactured. The industry, which includes many thousands of small businesses, has in various ways been supported by the state and the states but has lacked opportunities for more extensive research and major investments; they instead compete with the low wages. In recent years, products have also been developed based on domestic research. The export of medicines consists of both cheap medicines and active substances,
Manufacture of jewelery, especially gold, has a very long tradition in India and is still close to a quarter of the global gold jewelery market. The jewelry industry is also of great economic importance to the country, as jewelry is the fifth most profitable commodity group in exports. In the informal sector, there are many thousands of highly skilled goldsmiths, and gradually more and more of them are being subcontracted to large companies that, with “modern” design, turn to a global market.
An increasing middle class means a growing domestic demand for consumer products. Most of the domestic demand for industrial goods can be met. But still hardly a mass production of industrial products has grown on the same scale as in China. Above all, industrial companies have serious problems in terms of energy supply and transport.
The service sector has since 2000 shown an even faster growth than the industry. Purchasing power in the country has increased and with it the retail trade has grown. It accounts for more than 15 percent of the country’s GDP. Foreign retail chains are showing great interest in the growing Indian market, but the state has long adhered to restrictions on foreign companies in this industry. In early 2012, wholly owned one-brand department stores in India were allowed. The department stores are seen as a threat to the extensive sales in stalls and small shops, and multi-brand department stores wholly in foreign ownership are not yet allowed (2013). At the same time, many of the small businesses in the informal sector exist and have a weak base for state tax.
IT and IT-related services have shown even stronger growth and accounted for 7.5 percent of the country’s GDP in 2011-12. Three-quarters of these are service exports and more than half go to the United States. This is called outsourcing, as companies in high-cost countries buy IT services from low-cost countries. India has become a world leader in such exports. Here is a young, computer literate, English speaking and low-paid workforce combined with relatively good internet and telecommunications.
Another large and growing service sector is media and entertainment. For example, the Indian film industry is the world’s largest and produces more than a thousand films annually.
India has great opportunities to develop its tourism, but due to lack of resources and partly also because of different religious beliefs, much of the potential has not been exploited. However, since India liberalized its economy in 1991, tourism has increased. In 2010, the country had 5.8 million visitors. The United States accounts for the majority of visitors, followed by Sri Lanka, Germany, Japan and France.
Note: the capital city of India is New Delhi with a population of 142,000 (2011 Census). Other major cities include Bombay (Mumbai) with a population of 12.5 million (with suburbs), Delhi with a population of 11 million, Bangalore with a population of 8.4 million, Hyderabad with a population of 6.8 million, Ahmedabad with a population of 5.6 million, Madras (Chennai) with a population of 4.7 million, Calcutta (Kolkata) with a population of 4.5 million (2011 census).
The country’s vast mix of cultures and its long history offers a huge range of culturally interesting buildings, temples and mosques from different eras. A classic round trip, “the golden triangle”, is the one between Delhi, Agra and Jaipuroch. Naturally, India has the most to offer, from the glaciers of the Himalayas and the beaches of Goa to the desert of Rajasthan and the jungles of Bengal. Goa on the southwest coast is the first area in the country to become a major destination for European charter groups.
Since the early 1990s, foreign trade has become increasingly important in India’s economy. The very high import duties were gradually reduced and at the end of the 00s averaged 10 percent. In line with the expansion of the business sector and the development of a competitive industry, exports grew strongly with an annual increase of an average of just over 20 percent during the period 2003-08. Imports increased even more, mainly because more and more crude oil had to be imported.
- COUNTRYAAH: Find major trading partners of India, including major exports and major imports with latest trade value and market share as well as growth rate.
India’s foreign trade was adversely affected by the global recession in 2008-09 but to a lesser extent than in many other countries. Subsequently, there was a new sharp increase in foreign trade, but different product groups have shown different results. A number of external conditions, notably the euro crisis in Europe and political turmoil in the Arab world, led to subdued demand from some trading partners. In India’s economy, however, foreign trade still plays a small role and the country has a very small share of the world’s foreign trade.
Foreign trade has traditionally taken place over great distances, and the United States and Western European countries have been the most important customers.
Exports mainly comprise industrial goods, of which the largest product groups are workshop products and jewelery. Medicines and clothing are also prominent. In 2017, 10 percent of India’s foreign trade went to the EU countries, while trade with the US amounted to just over 15 percent. Trade exchanges with the OPEC countries reach an ever higher proportion for each year. This applies to the export of petroleum products from the refineries, but above all imports of crude oil, and the most important countries are the United Arab Emirates and Saudi Arabia. The largest increase in Indian foreign trade has been with developing countries in Southeast Asia and in the last decade, especially with China. The trade with neighboring countries is remarkably small.
In the same year, Indian imports accounted for more than 30 percent of crude oil and oil products and just under 20 percent of capital goods, mainly machinery. Gold, silver, pearls and gemstones accounted for more than 19 percent of import costs. Of all imports, 30 percent came from the OECD countries, 35 percent from the OPEC countries and 27 per cent from the developing countries in Asia. The three most important individual countries were China, the United States and the United Arab Emirates.
For many years, the trade balance has shown a growing deficit. In recent years, the reason has mainly been rising prices of crude oil and gold, the country’s two largest import goods. In addition, there is also a dampened demand for Indian industrial goods from most OECD countries. In the balance of payments, the deficit is offset by a portion of the income from service exports and the money sent by Indian migrant workers.