1. World Class Governance - why India must do it!

The Central and State Government and Quasi Government organizations must put their "House in Order", without it, we will continue to grow slowly and not as per our full potential. Good Governance & Effective Administration, which requires a precondition of effective high quality human capital, needs to be put in place, ASAP. Our notes bring up this one issue, which will solve most of the problems of our Nation. After 54 years of experience, both good and bad, we should be convinced. If not, kindly study the China - India comparison one page chart, and see for your self, where we are after 54 years of Independence! A lot of our effort, time and money is spent doing other people's work in India, who are paid to do the same, but due to the details as mentioned in our notes, the 1000 million people, NGO's & others, have to do it. The Governance & Administration of India MUST be improved ASAP. It will set off a positive Chain Reaction, which should propel our economy to a growth rate of 10 to 12% per year, from the present, 5 to 6 %. 2. Why NRI investment is so low into India? Employment generation is only possible if the basic fundamentals of the economy are in place. The same goes for Infrastructure development and Investments into India. The "acid test" is to catch the NRI funds. They invest in Europe, USA, S.E Asia, M.E., Thailand, Singapore, Indonesia, Malaysia, etc. but practically NIL in India! Why? Ask them for advice! We should study the manner in which up to 70% of infrastructure projects in the cities and provinces of China, are being promoted by local municipal bonds, via the Non-resident Chinese. In turn they get a quid pro for Industry and business development in China. No foreign investor is going to invest in 30 year municipal and local government bonds, only the NRI and PIO who understands India will invest, provided he is encouraged to do so! 3. India's world trade & buying power India has 17% of the world population, 2.2% of the land mass, 1.4% of the world's GDP but only 0.6% of the world's trade! In the last 54 years our foreign trade has had a negative growth from 3% to 0.6% of world trade, or minus 500%! It is obvious that 98.6% of the world's buying power [based on GDP], is outside India and 99.4% of the world's trade is also outside India. We MUST export more! India must become a base for manufacturing & services for the world markets. This will enhance our Buying Power. 4. Advantages of long term & Integrated Planning Some significant planning is required. Kindly study the 2020 plan of the state of Andra Pradesh one cannot plan from year to year, a long term Vision & Plan must be made out, for India. Do we have it? Why cannot the Planning Commission and the States have a 2020 integrated plan? 5. Vocational Training - the Big Employment Generator! We should concentrate on the German system of Vocational Training, where children after the 10th standard, have a choice of 2500 vocations, they work for 2 to 4 years part time in various establishments. During this period, they study part time in their area of Vocation. It's a win-win situation, since the establishment gets low cost human capital at minimum wages and also the person is fully developed to work, any where in the world in his or her field of work. Nearly 80 to 90% of youngsters, after the 10th opt for this. The universities are empty in Germany! For every one IIT we need 500 to 1500 vocational training institutes! While India needs IITs & IIM's, the real growth in the economy will come from Primary, Secondary Education and Vocational Training. 6. Increasing exports will boost the Indian Economy We must Concentrate on exports! How will Indian companies sell their products to such a small and shallow market, in India, since the GDP is only 1.4% of the World GDP? How will India pay the Import bill for Petroleum crude at US$17 billion per year when our exports are only US$42 billion per year, including software exports. India's oil imports alone, will surge by three times by 2007! Exports will boost India's Buying Power. Obviously India has to export much more, to the outside world. This has many advantages. Exports will improve Governance, Administration, Efficiency in manufacturing and services, cost competitiveness, FDI inflow, latest & best technology will come into the country, more jobs will be created, the infrastructure will have to improve and the standard of living of the people will go up. Indian organizations, in manufacturing or services, will start bench marking with the best, and not with each other, as was mentioned by Claude Smadga, last year at the WEF. 7. The Indian definition of Small Scale units needs to be reexamined & redefined! The present definition of small scale industry is a farce and will eventually harm this country. It has outlived it's usefulness. Please study what is happening in other parts of the world. SME's in all other countries means

companies up to 500 employees. In India it should mean the same. If we change our employee laws, and other operating parameters, India could take on any compitition on this Planet. Give Indians a level "Playing Field". In USA, Europe, Japan, Korea & Taiwan, which account for nearly 75% of the world's GDP, SME's account for nearly 50-75% of the GDP & exports in activities such as manufacturing, trading & services. SME's are nimble, fast, flexible, can change direction & policy and have "flat organisations". They are like the "Cheetah" in a forest. Large organisations are like the "elephant" in a forest. Nearly 99.3% of all organisation's are SME's & they provide about 70-75% of all employment. We should redefine the meaning of SME's in India and give a level playing field, in terms of cost of finance, adequate & good infrastructure, freedom in choice of Human and other resources. Reservation of items, for SSI units, in a changing world technology, needs to be scrapped! In USA, SME means an organisation of upto 1500 employees and turnover of US $ 0.75 to 29 million, depending upon the type of business. 8. Agriculture has a great future for India. - exploit it to the hilt, to improve GDP! India is endowed with a lot of water, sunshine, many rivers and good knowledge about agriculture. This needs to be better planned to improve yields, cold chains, marketing and exports of packaged and fresh products. The land holdings are getting smaller and smaller. Look at co-operative farming, with bigger land holdings and modern methods of farming. We should follow the model of Milk Co-ops also for fruits and vegetables. We should talk to experts within our country, eg., ICICI's Mr. K V Kamath, as how the villagers will get immediate payments, for their products and loans for improving their yields and productivity. We should get the big NRI's and International companies to look at our Fruits and Vegetables. India produces the maximum of fruits and vegetables in the world about 55 million and 75 million tons per year and 40% is wasted. What are we doing about it? Should we let it rot? Or should we let others pick it up and export or market in India. The answer is obvious. Can we allow our waste lands to be leased to International firms & NRI's for agriculture? 9. Tourism has a very large potential for employment generation & increase of GDP Concentrate on Tourism, this is a International Industry which is 7 times the size of Information Technology. I.T. world wide, is only US$500 billion. Tourism is about US$3700 billion business per year! The employment generation is very high. Nearly 2 to 4 jobs per tourist are generated! Let's learn from China, Malaysia.Don't you think India has something better to offer? A 10,000 old history with nearly 21 different cultures and languages! But here again we have to put our "House in Order", otherwise forget it. It is a shame how our heritage and tourist spots are being damaged and defaced. China has ten internal airlines, we have three, [Air-India, Indian Airlines and Jet Airways.] China is building 400,000 hotel rooms per year, while we have, in total about 600,000 hotel rooms. China attracts 87 million vs 2.5 million tourists/year, who visit India. Much smaller countries such as Nepal, Malaysia, Singapore, Hong Kong, etc attract many more tourists than India! The foreigner has very little confidence to travel here. We need better Governance! 10. Planning, execution & maintenance require the Best & Effective Human Resources Bring in the best Human Capital, in our think tanks. Let's learn from the rest of the world. We must Bench Mark India with the best on this Planet, then only will we improve! 11. The Call for Swadeshi At present, we cannot use the Best "Swadeshi" Effective Human Capital to run our own country and our own public and private sector. When future generations of Indians read Indian History, this will go down as the biggest tragedy for India.
The only Constant in Life is CHANGE!

Economy of India
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Economy of India

Currency Fiscal year Trade organisations

1 Indian Rupee (INR) () = 100 Paise April 1March 31 WTO, SAFTA

Statistics GDP (PPP) GDP growth GDP per capita GDP by sector $2.966 trillion (2007 est.) 9% (2007) $2,600 (PPP) agriculture: 17.8%, industry: 29.4%, services: 52.8% (2007 est.) Inflation (CPI) Population below poverty line 6.4% (CPI) (2007 est) 27.5% (2008 est.)[1]

Labour force Labour force by occupation Unemployment Main industries

516.4 million (2007 est.) agriculture: 60%, industry: 12%, services: 28% (2003) 7.2% (2007 est.) textiles, chemicals, food processing, steel, transportation equipment, cement, mining, petroleum, machinery, software, services External

Exports Export goods

$151,3 billion f.o.b. (2007 est) petroleum products, textile goods, gems and jewelry, engineering goods, chemicals, leather manufactures

Main export partners Imports Import goods Main import partners

US 15%, the People's Republic of China 8.7%, UAE 8.7%, UK 4.4% (2007) $230.5 billion f.o.b. (2007 est.) crude oil, machinery, gems, fertilizer, chemicals the People's Republic of China 10.6%, US 7.8%, Germany 4.4%, Singapore 4.4% Public finances

Public Debt Revenues Expenses

$149.2 billion (2007) $141.2 billion (2007 est.) $172.6 billion (2007 est.)

Main data source: CIA World Fact Book All values, unless otherwise stated, are in US dollars

This box: view talk edit

The economy of India has a long history. After 1947, India followed a socialist-inspired approach marked by extensive public ownership, licensing and regulation, red tape, and protectionism. The consequence was a very slow growth rate in the first three decades.[2][3] Economic liberalization since 1991 has moved India towards a market-based economy.[2][4] In the late 2000s, India's growth has reached 7.5%, which will double the average income in a decade.[2] McKinsey states that removing main obstacles "would free Indias economy to grow as fast as Chinas, at 10 percent a year".[5] India is the twelfth-largest economy in the world and the fourth largest by purchasing power parity adjusted exchange rates (PPP). On per capita basis, it ranks 128th in the world or 118th by PPP. States of India have large disparities in terms of investment-friendliness, per capita income, and income growth. One estimate is that only 20% of job-seekers have any vocational training.[6] Most people in India live on less than two purchasing power adjusted dollars a day. Half of children are underweight, nearly double that of Sub-Saharan Africa.[7] In terms of occupation, two-thirds of the Indian workforce earn their livelihood directly or indirectly through agriculture in rural villages. As a proportion of GDP, towns and cities make over two thirds of the Indian economy.[2] India's trade has reached a relatively moderate share 24% of GDP in 2006, up from 6% in 1985.[2] India's share of world trade has reached 1%.[8] Major exports include petroleum products, textile goods, gems and jewelry, engineering goods, chemicals, leather manufactures.[9] Major imports include crude oil, machinery, gems, fertilizer, chemicals.[9]

Sectors

Agriculture
Main articles: Agriculture in India, Forestry in India, Animal husbandry in India, and Fishing in India

Composition of India's total production (million tonnes) of foodgrains and commercial crops, in 200304.

India ranks second worldwide in farm output. Agriculture and allied sectors like forestry, logging and fishing accounted for 16.6% of the GDP in 2007, employed 60% of the total workforce[39] and despite a steady decline of its share in the GDP, is still the largest economic sector and plays a significant role in the overall socio-economic development of India. Yields per unit area of all crops have grown since 1950, due to the special emphasis placed on agriculture in the five-year plans and steady improvements in irrigation, technology, application of modern agricultural practices and provision of agricultural credit and subsidies since Green revolution in India. However, international comparisons reveal that the average yield in India is generally 30% to 50% of the highest average yield in the world.[40]
Slow agricultural growth is a concern for policymakers as some two-thirds of Indias people depend on rural employment for a living. Current agricultural practices are neither economically nor environmentally sustainable and India's yields for many agricultural commodities are low. Poorly maintained irrigation systems and almost universal lack of good extension services are among the factors responsible. Farmers' access to markets is hampered by poor roads, rudimentary market infrastructure, and excessive regulation. World Bank: "India Country Overview 2008"[41]

The low productivity in India is a result of the following factors:

According to "India: Priorities for Agriculture and Rural Development" by World Bank, India's large agricultural subsidies are hampering productivity-enhancing investment. Overregulation of agriculture has increased costs, price risks and uncertainty. Government interventions in labor, land, and credit markets are hurting the market. Infrastructure and services are inadequate.[42] Illiteracy, general socio-economic backwardness, slow progress in implementing land reforms and inadequate or inefficient finance and marketing services for farm produce.

Farming in Delhi.

The average size of land holdings is very small (less than 20,000 m) and is subject to fragmentation, due to land ceiling acts and in some cases, family disputes. Such small holdings are often over-manned, resulting in disguised unemployment and low productivity of labour. Adoption of modern agricultural practices and use of technology is inadequate, hampered by ignorance of such practices, high costs and impracticality in the case of small land holdings. World Bank says that the allocation of water is inefficient, unsustainable and inequitable. The irrigation infrastructure is deteriorating.[42] Irrigation facilities are inadequate, as revealed by the fact that only 52.6% of the land was irrigated in 200304,[43] which result in farmers still being dependent on rainfall, specifically the Monsoon season. A good monsoon results in a robust growth for the economy as a whole, while a poor monsoon leads to a sluggish growth.[44] Farm credit is regulated by NABARD, which is the statutory apex agent for rural development in the subcontinent.

India has many farm insurance companies that insure wheat, fruit, rice and rubber farmers in the event of natural disasters or catastrophic crop failure, under the supervision of the Ministry of Agriculture. One notable company that provides all of these insurance policies is agriculture insurance company of india and it alone insures almost 20 million farmers.

Natural resources
See also: Energy policy of India India's total cultivable area is 1,269,219 km (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 km and receives an average annual rainfall of 1,100 mm. Irrigation accounts for 92% of the water utilisation, and comprised 380 km in 1974, and is expected to rise to 1,050 km 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. In 2008, India had the world's third largest fishing industry.[62] India's major mineral resources include Coal (3rd-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.[63][39] Rising energy demand concomitant with economic growth has created a perpetual state of energy crunch in India. India is poor in oil resources and is currently heavily dependent on coal and foreign oil imports for its energy needs. Though India is rich in Thorium, but not in Uranium, which it might get access to in light of the nuclear deal with US. India is rich in certain energy resources which promise significant future potential - clean / renewable energy resources like solar, wind, biofuels (jatropha, sugarcane).

Government
Main article: Government of India See also: Taxation in India

The number of people employed in non-agricultural occupations in the public and private sectors. Totals are rounded. Private sector data relates to non-agriculture establishments with 10 or more employees.[64]

The current government has concluded that most spending fails to reach its intended recipients.[65] Lant Pritchett calls India's public sector "one of the world's top ten biggest problems - of the order of AIDS and climate change".[65] The Economist's article about Indian civil service (2008) says that Indian central government employs around 3 million people and states another 7 million, including "vast armies of paper-shuffling peons"[65]. According to a government officer responsible for personnel, India has 80,000 "Category One" Indian Administrative Service (IAS) bureaucrats who make decisions.[65] Furthermore, the Economist writes that an elite of merely 5600 members "mostly runs India".[65] India is divided to 604 districts, size of small countries.[65] The Economist described how a district head officer spends 60% of his time dealing individual supplicants asking for things such as alms or firewood instead of larger issues.[65] Million dollar bureaucracies can be run without a single computer in the management.[65] At local level, administration can be worse. It is not unheard of that most state assembly seats are hold by convicted criminals.[66] The Reserve Bank of India has warned that India's public-debt to GDP ratio is over 70 percent.[67] One study found out that 25% of public sector teachers and 40% of public sector medical workers could not be found at the workplace. Among teachers who were paid to teach, absence rates ranged from 15% in Maharashtra to 71% in Bihar. Only 1 in nearly 3000 public school head teachers had ever dismissed a teacher for repeated absence. Despite poorer absence rates, public sector teachers enjoy salaries at least five times higher than private sector teachers. India's absence rates are one of the worst in the world.[68][69][70][71] A greater private sector role with means such as education vouchers has been proposed.[70]

Infrastructure

A map of the network of National Highways in India

Development of infrastructure was completely in the hands of the public sector and was plagued by corruption, bureaucratic inefficiencies, urban-bias and an inability to scale investment.[72] India's low spending on power, construction, transportation, telecommunications and real estate, at $31 billion or 6% of GDP in 2002 had prevented India from sustaining higher growth rates. This has prompted the government to partially open up infrastructure to the private sector allowing foreign investment[73][74][64] which has helped in a sustained growth rate of close to 9% for the past six quarters.[75] Some 600 million Indians have no mains electricity at all.[76] While 80 percent of Indian villages have at least an electricity line, just 44 percent of rural households have access to electricity.[77] According to a sample of 97,882 households in 2002, electricity was the main source of lighting for 53% of rural households compared to 36% in 1993.[78] Some half of the electricity is stolen, compared with 3% in China. The stolen electricity amounts to 1.5% of GDP.[79][77] Almost all of the electricity in India is produced by the public sector. Power outages are common.[76] Many buy their own power generators to ensure electricity supply. As of 2005 the electricity production was at 661.6 billion kWh with oil production standing at 785,000 bbl/day. In 2007, electricity demand exceeded supply by 15%.[76] Multi Commodity Exchange has tried to get a permit to offer electricity future markets.[80] Indian Road Network is developing. Trucking goods from Gurgaon to the port in Mumbai can take up to 10 days.[8] Taxes and bribes are common between state borders; Transparency International estimates that truckers pay annually $5 billion in bribes.[81][8] India has the world's second largest road network.[82] Although India has only 1% of the world's vehicles, India has 8 per cent of the world's vehicle fatalities.[83][84] Container traffic is growing at 15% a year.[85] Some 60% of Indias container traffic is handled by the Jawaharlal Nehru Port Trust in Mumbai. It has just 9 berths compared to 40 in Singapore's main port. It takes an average of 21 days to clear import cargo in India compared to just 3 in Singapore.[76] China had 30 times more container traffic in 2004.[86] In 2007, an article by Businessweek reported that India's cell-phone market is the fast growing in the world and companies adding some 6 million new customers a month.[8] Very few Indians use Internet. As of January 15, 2007, there were 2.10 million broadband lines in

India.[87] The entire India has only 25,000 tourist-class hotel rooms, compared with more than 140,000 in Las Vegas alone. Hotel companies see opportunities for big investments.[8] In some places, no major irrigation works have been done since the British era despite opportunities to boost agricultural productivity. Some 700 million Indians do not have access to a proper toilet.[76] Only 13% of sewage is treated according to one estimate, leaving rivers and other water resources under severe strain.[76] Most cities supply water only a few hours a day and none provides 24h water. A World Bank report says it is an institutional problem in water agencies, or "how the agency is embedded in the relationships between politics and the citizens who are the consumers."[86]
See also: Transport in India See also: Indian Road Network See also: Ports in India See also: States of India by installed power capacity See also: Water supply and sanitation in India

Currency and finance

See also: Indian rupee, Banking in India, and Insurance in India

Cuffe Parade, Mumbai is an important business district in India, home to the World Trade Center as well as other important financial institutions.

The Indian rupee is the only legal tender accepted in India. The exchange rate as of November 18, 2008 is about 49.27 to a US dollar, [88] 64.01 to a Euro, and 80.45 to a UK pound. The Indian rupee is accepted as legal tender in the neighboring Nepal and Bhutan, both of which peg their currency to that of the Indian rupee. The rupee is divided into 100 paise. The highest-denomination banknote is the 1,000 rupee note; the lowest-denomination coin in circulation is the 1 rupee coin (it earlier had 25 & 50 paise coins which have been discontinued by the Reserve Bank of India).[89] There has been a recent fall in the value of the Rupee as a result of the global financial crisis of 2008, as foreign institutional investors sell large amounts of Indian stocks and invest in US treasury bonds. India inherited several institutions, such as the civil services, Reserve Bank of India, railways, etc., from its 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 in the city. The RBI, the country's central bank was established on April 1, 1935. 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.[90] The Securities and Exchange Board of India (SEBI), established in 1992, regulates the stock markets and other securities markets of the country.

Socio-economic characteristics
Main article: Socio-economic issues in India

Income and consumption

Further information: Poverty in India

Percentage of population living under the poverty line of $1 (PPP) a day, currently 356.35 rupees a month in rural areas (around $7.4 a month).

As of 2005, 85.7% of the population lives on less than $2.50 (PPP) a day, down from 92.5% in 1981. This compares with 80.5% in Sub-Saharan Africa.[92] 75.6% of the population lives on less than $2 a day (PPP), which is around 20 rupees or $0.5 a day in nominal terms. It was down from 86.6% and compares with 73.0% in Sub-Saharan Africa.[93][94][95][96][92] A 24.3% of the population earned less than $1 (PPP, around $0.25 in nominal terms) a day in 2005, down from 42.1% in 1981.[92][97] 41.6% of its population is living below the new international poverty line of $1.25 (PPP) per day, down from 59.8% in 1981.[92] The World Bank further estimates that a third of the global poor now reside in India. Today, more people afford to a bicycle than ever before. Some 40% of Indian households owns a bicycle, with ownership rates ranging from around 30% to 70% at state level.[98] Housing is still very modest. According to Times of India, "a majority of Indians have per capita space equivalent to or less than a 10 feet x 10 feet room for their living, sleeping, cooking, washing and toilet needs." and "one in every three urban Indians lives in homes too cramped to exceed even the minimum requirements of a prison cell in the US."[99] The average is 103 sq ft per person in rural areas and 117 sq ft per person in urban areas.[99] Poverty in India is some of the starkest in the world. Around half of Indian children are malnourished. The proportion of underweight children is nearly double that of Sub-Saharan Africa.[7][100] However, India has not had famines since the Green Revolution in the early 1970s. While poverty in India has reduced significantly, official figures estimate that 27.5%[101] of Indians still lived below the national poverty line of $1 (PPP, around 10 rupees in nominal terms) a day in 2004-2005.[102] A 2007 report by the state-run National Commission for Enterprises in the Unorganised Sector (NCEUS) found that 65% of Indians, or 750 million people, lived on less than 20 rupees per day[103] with most working in "informal labour sector with no job or social security, living in abject poverty."[104]

Since the early 1950s, successive governments have implemented various schemes, under planning, to alleviate poverty, that have met with partial success. All these programmes have relied upon the strategies of the Food for work programme and National Rural Employment Programme of the 1980s, which attempted to use the unemployed to generate productive assets and build rural infrastructure.[64] In August 2005, the Indian parliament passed the Rural Employment Guarantee Bill, the largest programme of this type in terms of cost and coverage, which promises 100 days of minimum wage employment to every rural household in 200 of India's 600 districts. The question of whether economic reforms have reduced poverty or not has fuelled debates without generating any clear cut answers and has also put political pressure on further economic reforms, especially those involving the downsizing of labour and cutting agricultural subsidies.[105][106] McKinsey has made an animation of the income distribution.

Education and employment

Further information: Education in India

Boys seated in school near Baroda, Gujarat.

Fewer than 40 percent of adolescents in India attend secondary schools.[107] Agricultural and allied sectors accounted for about 57% of the total workforce in 19992000, down from 60% in 199394. While agriculture has faced stagnation in growth, services have seen a steady growth. Of the total workforce, 8% is in the organised sector, two-thirds of which are in the public sector. The NSSO survey estimated that in 19992000, 106 million, nearly 10% of the population were unemployed and the overall unemployment rate was 7.32%, with rural areas doing marginally better (7.21%) than urban areas (7.65%). India's labor force is growing by 2.5% every year, but employment is growing only at 2.3% a year.[108] Unemployment in India is characterized by chronic underemployment or disguised unemployment. Government schemes that target eradication of both poverty and unemployment (which in recent decades has sent millions of poor and unskilled people into urban areas in search of livelihoods) attempt to solve the problem, by providing financial assistance for setting up businesses, skill honing, setting up public sector enterprises, reservations in governments, etc. The decreased role of the public sector after liberalization has further underlined the need for focusing on better education and has also put political pressure on further reforms.[109][64]

In 2006, remittances from Indian migrants overseas made up $27 billion or about 3% of India's GDP.[110]

Corruption
Main article: Corruption in India

India ranked 120th on the Ease of Doing Business Index 2008, behind countries such as China (83rd), Pakistan (86th), and Nigeria (108th). Corruption has been one of the pervasive problems affecting India. The economic reforms of 1991 reduced the red tape, bureaucracy and the Licence Raj that had strangled private enterprise and was blamed for the corruption and inefficiencies. Yet, a 2005 study by Transparency International (TI) India found that more than half of those surveyed had firsthand experience of paying bribe or peddling influence to get a job done in a public office.[111] The Right to Information Act (2005) and equivalent acts in the states, that require government officials to furnish information requested by citizens or face punitive action, computerisation of services and various central and state government acts that established vigilance commissions have considerably reduced corruption or at least have opened up avenues to redress grievances.[111] The 2007 report by Transparency International ranks India at 72nd place and states that significant improvements were made by India in reducing corruption.[112][113]

Regional imbalance

Rural life in Rajasthan. See also: States of India by size of economy and List of regions of India

One of the critical problems facing India's economy is the sharp and growing regional variations among India's different states and territories in terms of per capita income, poverty, availability of infrastructure and socio-economic development.[114] Between 1999 and 2008, the annualized growth rates for Gujarat (8.8%), Haryana (8.7%), or Delhi (7.4%) were much higher than for Bihar (5.1%), Uttar Pradesh (4.4%), or Madhya Pradesh (3.5%).[115]

Poverty rates in rural Orissa (43%) and rural Bihar (40%) are some of the worst in the world.[86] On the other hand, rural Haryana (5.7%) and rural Punjab (2.4%) compare well with middle-income countries.[86] The five-year plans have attempted to reduce regional disparities by encouraging industrial development in the interior regions, but industries still tend to concentrate around urban areas and port cities[116] After liberalization, the more advanced states are better placed to benefit from them, with infrastructure like well developed ports, urbanisation and an educated and skilled workforce which attract manufacturing and service sectors. The union and state governments of backward regions are trying to reduce the disparities by offering tax holidays, cheap land, etc., and focusing more on sectors like tourism, which although being geographically and historically determined, can become a source of growth and is faster to develop than other sectors.[117][118]
Lagging states need to bring more jobs to their people by creating an attractive investment destination. Reforming cumbersome regulatory procedures, improving rural connectivity, establishing law and order, creating a stable platform for natural resource investment that balances business interests with social concerns, and providing rural finance are important. World Bank: India Country Overview 2008[41]

Environment and health

Millions depend on the polluted Ganges river. See also: Famine in India, Environment in India, Water supply and sanitation in India, and HIV/AIDS in India

On Yale and Columbia's Environmental Performance Index, India's score is 21/100 on sanitation, compared with 67/100 for the region and 48/100 for the country income group.[119] About 1.2 billion people in developing nations lack clean, safe water because most household and industrial wastes are dumped directly into rivers and lakes without treatment. This contributes to the rapid increase in waterborne diseases in humans.[120] Out of India's 3119 towns and cities, just 209 have partial treatment facilities, and only 8 have full wastewater treatment facilities (WHO 1992).[121] 114 cities dump untreated sewage and partially cremated bodies directly into the Ganges River.[122] Downstream, the untreated water is used for drinking, bathing, and washing. This situation is typical of many rivers in India as well as other developing countries. NewsWeek describes Delhi's sacred Yamuna River as "a putrid ribbon of black sludge" where fecal bacteria is 10,000 over safety limits despite a 15-year

program to address the problem.[119] Cholera epidemics are not unknown.[119] Open defecation is widespread even in urban areas of India.[123][124] Indoor air pollution from burning wood, coal and animal dung is widespread.[125] 70% of rural households in India lack ventilation. Particulate concentrations in houses are reported to range from 8,300 to 15,000 g/m3, greatly exceeding the 75 g/m3 maximum standard for indoor particulate matter in the United States.[126] Changes in ecosystem biological diversity, evolution of parasites, and invasion by exotic species all frequently result in disease outbreaks such as cholera which emerged in 1992 in India. The frequency of AIDS/HIV is increasing. In 1996, about 46,000 Indians out of 2.8 million (1.6 % of the population) tested were found to be infected with HIV.[127] Even in the rich regions, health care is poor. World Bank reports that "a detailed survey of the knowledge of medical practitioners for treating five common conditions in Delhi found that the typical quality doctor in a public primary health center has a more than 50-50 chance of recommending a harmful treatment". The competence rating of India's doctors is below Tanzania's.[86]

External trade and investment

Global trade relations

Indian exports in 2006

International trade as a proportion of GDP reached 24% by 2006, up from 6% in 1985 and still relatively moderate.[2][128] India currently accounts for 1.2% of World trade as of 2006 according to the WTO.[129] Until the liberalisation of 1991, India was largely and intentionally isolated from the world markets, to protect its fledging economy and to achieve self-reliance. Foreign trade was subject to import tariffs, export taxes and quantitative restrictions, while foreign direct investment was restricted by upper-limit equity participation, restrictions on technology transfer, export obligations and government approvals; these approvals were needed for nearly 60% of new FDI in the industrial sector. The restrictions ensured that FDI averaged only around $200M annually between 1985 and 1991; a large percentage of the capital flows consisted of foreign aid, commercial borrowing and deposits of non-resident Indians.[130] India's exports were stagnant for the first 15 years after independence, due to the predominance of tea, jute and cotton manufactures, demand for which was generally

inelastic. Imports in the same period consisted predominantly of machinery, equipment and raw materials, due to nascent industrialisation. Since liberalisation, the value of India's international trade has become more broad-based and has risen to Rs. 63,080,109 crores in 200304 from Rs.1,250 crores in 195051.[citation needed] India's major trading partners are China, the US, the UAE, the UK, Japan and the EU.[131] The exports during April 2007 were $12.31 billion up by 16% and import were $17.68 billion with an increase of 18.06% over the previous year.[132] India is a founding-member of General Agreement on Tariffs and Trade (GATT) since 1947 and its successor, the World Trade Organization. While participating actively in its general council meetings, India has been crucial in voicing the concerns of the developing world. For instance, India has continued its opposition to the inclusion of such matters as labour and environment issues and other non-tariff barriers into the WTO policies.[133] Although individual leaders have proposed new policies, India is still hostile to international trade. India was proud of the Doha Development Round failure.[134]

Balance of payments
Since independence, India's balance of payments on its current account has been negative. Since liberalisation in the 1990s (precipitated by a balance of payment crisis), India's exports have been consistently rising, covering 80.3% of its imports in 200203, up from 66.2% in 199091. Although India is still a net importer, since 199697, its overall balance of payments (i.e., including the capital account balance), has been positive, largely on account of increased foreign direct investment and deposits from non-resident Indians; until this time, the overall balance was only occasionally positive on account of external assistance and commercial borrowings. As a result, India's foreign currency reserves stood at $285 billion in 2008, which could be used in infrastructural development of the country if used effectively. India's reliance on external assistance and commercial borrowings has decreased since 1991 92, and since 200203, it has gradually been repaying these debts. Declining interest rates and reduced borrowings decreased India's debt service ratio to 4.5% in 2007.[135] In India, External Commercial Borrowings (ECBs) are being permitted by the Government for providing an additional source of funds to Indian corporates. The Ministry of Finance monitors and regulates these borrowings (ECBs) through ECB policy guidelines.[136]

Investment
Share of top five investing countries in FDI inflows. (20002007)[137]

Rank

Country

Inflows (Million USD)

Inflows (%)

Mauritius

85,178

44.24%[138]

United States

18,040

9.37%

United Kingdom

15,363

7.98%

Netherlands

11,177

5.81%

Singapore

9,742

5.06%

Foreign direct investment in India has reached 2% of GDP, compared with 0.1% in 1990, and Indian investment in other countries rose sharply in 2006.[2] As the fourth-largest economy in the world in PPP terms, India is a preferred destination for foreign direct investments (FDI);[139] India has strengths in information technology and other significant areas such as auto components, chemicals, apparels, pharmaceuticals, and jewellery. Despite a surge in foreign investments, rigid FDI policies resulted in a significant hindrance. However, due to some positive economic reforms aimed at deregulating the economy and stimulating foreign investment, India has positioned itself as one of the frontrunners of the rapidly growing Asia Pacific Region.[139] India has a large pool of skilled managerial and technical expertise. The size of the middle-class population stands at 50 million and represents a growing consumer market.[140] India's recently liberalized FDI policy (2005) allows up to a 100% FDI stake in ventures. Industrial policy reforms have substantially reduced industrial licensing requirements, removed restrictions on expansion and facilitated easy access to foreign technology and foreign direct investment FDI. The upward moving growth curve of the real-estate sector owes some credit to a booming economy and liberalized FDI regime. In March 2005, the government amended the rules to allow 100 per cent FDI in the construction business.[141] This automatic route has been permitted in townships, housing, built-up infrastructure and construction development projects including housing, commercial premises, hotels, resorts, hospitals, educational institutions, recreational facilities, and city- and regional-level infrastructure. A number of changes were approved on the FDI policy to remove the caps in most sectors. Fields which require relaxation in FDI restrictions include civil aviation, construction development, industrial parks, petroleum and natural gas, commodity exchanges, creditinformation services and mining. But this still leaves an unfinished agenda of permitting greater foreign investment in politically sensitive areas such as insurance and retailing. FDI inflows into India reached a record US$19.5bn in fiscal year 2006/07 (April-March), according to the government's Secretariat for Industrial Assistance. This was more than double the total of US$7.8bn in the previous fiscal year. The FDI inflow for 2007-08 has been reported as $24bn[142] and for 2008-09, it is expected to be above $35 billion.[143] A critical factor in determining India's continued economic growth and realizing the potential to be an economic superpower is going to depend on how the government can create incentives for FDI flow across a large number of sectors in India.[144]