http://en.wikipedia.

org/wiki/Economy_of_India#Socio-economic_characteristics

The economy of India is the third largest in the world as measured by purchasing
power parity (PPP). When measured in USD exchange-rate terms, it is the twelfth
largest in the world, with a GDP of US $1.0 trillion (2007).[1] India is the second
fastest growing major economy in the world, with a GDP growth rate of 9.4% for the
fiscal year 2006–2007.[2] However, India's huge population results in a per capita
income of $4,031 at PPP and $885 at nominal (2007 estimate).[3] The World Bank
classifies India as a low-income economy.[4] [5]

India's economy is diverse and encompasses agriculture, handicrafts, textile,

manufacturing, and a multitude of services. Although two-thirds of the Indian
workforce still earn their livelihood directly or indirectly through agriculture, services
are a growing sector and are playing an increasingly important role of India's
economy. The advent of the digital age, and the large number of young and educated
populace fluent in English, is gradually transforming India as an important 'back
office' destination for global companies for the outsourcing of their customer services
and technical support. India is a major exporter of highly-skilled workers in software
and financial services, and software engineering. Other sectors like manufacturing,
pharmaceuticals, biotechnology, nanotechnology, telecommunication, shipbuilding,
aviation and tourism are showing strong potentials with higher growth rates.

India followed a socialist-inspired approach for most of its independent history, with
strict government control over private sector participation, foreign trade, and foreign
direct investment. However, since the early 1990s, India has gradually opened up its
markets through economic reforms by reducing government controls on foreign trade
and investment. The privatisation of publicly owned industries and the opening up of
certain sectors to private and foreign interests has proceeded slowly amid political
debate.

India faces a burgeoning population and the challenge of reducing economic and
social inequality. Poverty remains a serious problem, although it has declined
significantly since independence, mainly due to the green revolution and economic
reforms.

External trade and investment

Share of top five investing countries in FDI inflows. (1991–2004)[77]

Share of top five investing countries in FDI inflows. (1991–

2004)[77]
Inflows
Rank Country Inflows (%)
(Million USD)
1 Mauritius 8,898 34.49%[78]
2 United States 4,389 17.08%
3 Japan 1,891 7.33%
4 Netherlands 1,847 7.16%
5 United Kingdom 1,692 6.56%
Global trade relations

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.[79]

Indian exports in 2005

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 2003–
04 from Rs.1,250 crores in 1950–51.[citation needed] India's major trading
partners are China, the US, the UAE, the UK, Japan and the EU.[80]
The exports during August 2006 were $10.3 billion up by 41.14%
and import were $13.87 billion with an increase of 32.16% over the
previous year [8].

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.[81]

Foreign direct investment in India

As the third-largest economy in the world, India is undoubtedly one of the

most preferred destinations for foreign direct investments (FDI); India has strength in
information technology and other significant areas such as auto components,
chemicals, apparels, pharmaceuticals and jewellery. India has always held promise for
global investors, but its rigid FDI policies were a significant hindrance in this regard.
However, as a result of a series of ambitious and positive economic reforms aimed at
deregulating the economy and stimulating foreign investment, India has positioned
itself as one of the front-runners of the rapidly growing Asia Pacific Region. India has
a large pool of skilled managerial and technical expertise. The size of the middle-class
population at 300 million exceeds the population of both the US and the EU, and
represents a powerful consumer market.[85]

India's recently liberalised 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.[86] 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