Economy

India is the 2nd largest country in the world, measured by population and arable land. When measured in USD exchange-rate terms, it is the 10th largest in the world, with a GDP which recently crossed US $1.0 trillion (2007). In terms of Purchasing Power Parity (PPP) it ranks 3rd in the world. The accelerated rate of growth of around 8% to 9% (over the past 5 years) that it has shown, puts it on to a trajectory which might see it rise from the 10th largest to the 3rd largest economy in the world ( in US Dollar terms not PPP) by 2025, just behind US and China.
In terms of growth it is the second fastest growing major economy in the world. GDP grew at 9.4% for the fiscal year 2006–2007. The world has woken up to the fact that the Indian Economy will now a force to contend with. In the 1970's and 80's when my generation studied its economics and when we first started working we were mentally reconciled to living in an Economy which was fated to grow at " the Hindu rate of growth". A pejorative term for the growth rate of 3.5% which India was destined never to grow out of, hemmed in as it was by "a vicous circle of poverty". Low growth leading to low savings and therefore low capital deployment leading to low growth ad infinitum.
But in the early 1990's the Economy was compelled by circumstances to reform. And now more than a decade later, it has finally reaped the benefits of over a decade of reluctant reforms. There is increasing consensus now that the Indian and Chinese economies will be the world's growth engines in the 21st Century, replacing the US which has dominated the world economy for the last 50 years. Witness some of the following changes that have altered the Indian economic landscape so dramatically in the past 15 years.
The economy has averaged a growth of 6% per annum since 1990, reducing poverty by 10% points in the process. Industry is no longer a State monopoly. Almost all sectors have been opened up to the private sector. Import licensing has been abolished. Duties, which were as high as 400% on some items have been rationalized to internationally acceptable levels. The growth rate has averaged 8.5% over the past five years.These are remarkable achievements for an economy that was tightly protected and controlled for 46 years from 1947 to 1993. What are most noticeable are the intangibles: the feel good factor, the "can do" attitude and the increasing amount of young managers that are turning entrepreneurs.Foreign direct investment (FDI) has been liberalized such that inflows have increased from miserable $200m annually in the beginning of the '90's. India attracted $15.7 billion in FDI in the first 10 months of 2007, double the amount in the same period of 2006 ( yet far below the $74.7 billion China attracted in the whole of 2006). Foreign exchange reserves have climbed rapidly from USD 40 billion in March 2001 to 290 billion now. According to the Reserve Bank of India, the country’s foreign exchange reserves stood at $290.8 billion for the week ended February 8 2008, up 57% from a year earlier. This is striking when we recall that the level was near zero at the beginning of the reforms period, just a decade and a half ago.Indian software exports boom
India's software and services exports have been rising rapidly. IT ,IT-enabled services, Business Process Outsourcing ( BPO) and other administrative support operations are together predicted to grow at 25% pa for the forseeable future.
Software exports now make up 20 % of India's total export revenue, up from 5 % in 1997. Currently, India exports services ( including software) worth more than $56 billion every year whereas its merchandise exports are over $100 billion per annum.IT amd ITES services alone are expected to export USD 40 billion worth in FY '08. Serrvices exports have been growing at an average rate of 28% per annum during the past 5 - 6 years while merchandise exports have maintained a growth rate of 22 % p.a. in this period. According to a paper by the Federation of Indian Chambers of Commerce and Industry (FICCI), Indian services exports would be close to $311 billion by 2012 and are expected to overtake the expected level of merchandise exports of $305 billion. The study adds that India’s export of commercial services would cross that of China by 2009. .
As per a Nasscom-McKinsey Study the IT and IT enabled services sector will account for 7 % of India's GDP by March 2008. The contribution of IT-ITES industry to country’s GDP grew from 4.7% of last year, thus providing employment to more than 1.6 million of our youth.