India Economy

Business

Despite widespread poverty and still a relatively large share of agriculture in the gross domestic product (GDP), India is one of the G20 countries. According to bridgat, the service and industrial sectors are becoming increasingly important, even if the share of employment in the latter is stagnating. India used to practice the system of a »mixed economy«, i. That is, a broad private sector was opposed by an extensive state sector and economic management carried out over five-year plans. Since the mid-1980s, and increasingly since 1991, India has opened up to the world market by reducing import tariffs, making it easier for foreign companies and the real devaluation of the rupee, abolishing the system of excessive state regulation (production licenses) and also (initially hesitantly) privatizing state-owned companies. Only two strategic sectors (retail and nuclear) were closed to foreign private capital until 2012. As a result, the once modest growth rates of the Indian economy have increased significantly (over 5% per year in real terms since the mid-1980s, 6% since the 1990s, 2010: 10.4%, 2018: 7.1%). Exports have become more dynamic and the still high proportion of the absolutely poor in the population has decreased significantly (to around 25%).

Foreign trade: The Indian trade balance was almost constantly negative after 1965, despite the import-substituting policy. The (now complete) abolition of import licenses, the partial freeing up of the exchange rate and the liberalization of foreign investments then brought an increase in exports, a reduction in the trade deficit (2018 exports: US $ 322 billion, imports 618 billion) and an increase in foreign investment (1992: US $ 460 million, 2017: US $ 40.0 billion). The most important import goods are crude oil and products, chemical products, machines, electronics, building materials and precious metals. The import of food only plays a marginal role. When it comes to export goods, petroleum and petroleum products, textiles and clothing, chemical products, jewelry and machinery are at the top. Software exports have also developed extremely dynamically in recent years. The most important trading partners are (in that order) the USA, China and the United Arab Emirates. The constant deficit in the current account has increased significantly despite high surpluses in services (software exports), external private capital inflows (mainly direct investments) and guest worker remittances (2017: 1.4% of GDP). This also reduced the foreign exchange reserves (2018: US $ 369.8 billion) and increased the debt indicators while the gross external debt remained moderate (US $ 510.4 billion). The constant deficit in the current account has increased significantly despite high surpluses in services (software exports), external private capital inflows (mainly direct investments) and guest worker remittances (2017: 1.4% of GDP). This also reduced the foreign exchange reserves (2018: US $ 369.8 billion) and increased the debt indicators while the gross external debt remained moderate (US $ 510.4 billion). The constant deficit in the current account has increased significantly despite high surpluses in services (software exports), external private capital inflows (mainly direct investments) and guest worker remittances (2017: 1.4% of GDP). This also reduced the foreign exchange reserves (2018: US $ 369.8 billion) and increased the debt indicators while the gross external debt remained moderate (US $ 510.4 billion).

Agriculture

Despite the accelerated expansion of industry, 42.7% of the workforce was still working in agriculture in 2017; they generated 15.6% of GDP (1965: 47%). Agriculture forms the basis of the food supply. Rice and wheat are by far the most important foods. Rice cultivation is mainly found in the east and south as well as in the Ganges plain, while wheat cultivation is concentrated in northern India. Thanks to the “green revolution” (and with it increasing irrigation) the grain harvest has risen continuously (apart from weather-related collapses) and faster than the population growth, grain imports are practically no longer taking place; in a few years it was even possible to export surpluses. For the other agricultural products, the increase in harvests and hectare productivity was less pronounced, due to the small increase in irrigated areas and the slow introduction of high-yielding varieties.

An exception is cotton , the production of which has been more than doubled through the cultivation of genetically modified varieties. Other products that are important for the world market are above all spices (which make a high export contribution), jute (albeit with almost stagnant production), sugar cane and tea ; India is the second largest tea producer in the world (2017: 1.3 million t), but only declining quantities are exported due to increasing internal consumption.

Although India has around 185 million cattle, livestock farming is of little importance for religious reasons (sacred cows). Meat plays only a minor role in the low average income and because of the widespread vegetarian diet. However, India has become the world’s largest milk producer.

With a large amount of resources invested in irrigation, electrification and loan financing for the farmers, agricultural production in India has been increased slightly above the rate of population growth over the past two decades, so that self-sufficiency has been achieved, state stockpiling has been increased and past famines have been avoided. The increase in harvests, however, was concentrated in the already prosperous parts of the country and by product for wheat and rice. In recent years, the costs of agricultural subsidies (especially high input subsidies) have become increasingly disproportionate to the increase in production, and extensive irrigation has brought with it considerable environmental problems (soil erosion, salinisation and swamping). The high vulnerability of agriculture and thus of the entire Indian economy in the absence of the monsoons is still a problem. Despite land reforms after independence and in the 1960s and 70s, the distribution of land is quite unequal. Despite reforms, leases are burdened by high tax obligations. Mainly, however, the growing population as well as the inheritance custom of real division causes a constant reduction in the size of agricultural holdings, which averaged 1.4 hectares.

Forestry: Despite relatively restrictive forest laws and the exclusion of extensive protected areas, deforestation through logging, slash and burn and forest consumption by state development projects has progressed somewhat more slowly since the mid-1970s and has endangered the ecological balance, especially in the Himalayan foothills. The original forest stock has been reduced by 80%; today 23.8% of the land area is still covered with forest, to a lesser extent with primary forest. The annual logging is 354 million m ³ (mainly firewood), one eighth of this amount would be ecologically justifiable; however, the afforestation has increased significantly.

Fisheries: Fishing is carried out both as inland and deep-sea fishing. India has greatly expanded its fishing fleet since the early 1980s. In 2015, the catches reached 10.1 million t, of which 5.2 million t came from breeding facilities. The main exports are shrimp and processed fish.

Natural resources

With its mineral resources, especially coal and iron ore (main deposits in Goa), India has a good raw material base. The considerable iron ore reserves (an estimated 10 billion t) are sufficient for their own industrial needs and also allow significant exports. The coal reserves (mainly in the northeastern Dechan) amount to around 61 billion t. Coal mining, which has been nationalized since 1973, still works largely in outdated mines with a low average output. In addition to iron, manganese and bauxite are important.

As a non-member of OPEC, India is one of the larger producers of crude oil with a production volume of (2018) 39.5 million t. However, the development of its own oil fields (mainly offshore fields near Mumbai) by the state-owned companies took place slowly, so that from 1986 the government offered them to foreign corporations for exploration.