INDIA Key Statistics

Overview Country:

India

Capital:
System of Government: Head of State: Head of Government:

New Delhi
Parliamentary Democracy President Pratibha Patil Prime Minister Dr. Manmohan Singh

Written Constitution:
Currency: GDP (U.S. Dollar): GDP/Capita : Population: Main Trading Partners:

Yes
Indian Rupee
$ 1.43 Trillion (Nominal)

$ 4.06 Trillion (PPP) $ 1,265 (Nominal) $ 3,339 (PPP) 1.2 Billion

USA, China, Saudi Arabia, UAE, Australia, Germany

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Domestic Politics
India is a fractious multi-party democracy with no single political party dominating the national stage. Several mostly regional parties form the Congress Party-led coalition at the Centre. Regional parties run on linguistic, caste-based, or ethnic platforms reflecting the diversity of the country that has led to it being called a subcontinent. The ruling coalition is called the United Progressive Alliance (UPA) and is led by the Congress party. The other parties in the coalition are either regional parties or caste/religion based parties.

Recent Developments
The ruling coalition has found itself embroiled in a series of corruption scandals over the last 12 months. The ensuing public outrage has led to calls for stronger civil society and the creation of new institutions that would make government officials more accountable and easier to prosecute. Anti-incumbent feelings came to the fore in recent state assembly elections where incumbent parties or coalitions were defeated by challengers in 3 out of 4 cases. The government has come under increasing pressure from coalition partners as well as parties on the outside over rising inflation associated with increasing international commodity prices.

The second largest political formation is the National Democratic Alliance (NDA) led by the Bharatiya Janata Party (BJP).
Congress and the BJP resemble each other in most respects in terms of economic and foreign policy the major difference being in their approach to social and religious issues with the BJP being more conservative. Religion, caste, and language very often play an important role in politics and the positions that various parties take sometimes leading to incidents of violence.

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International Relations
India lies in a difficult neighborhood sharing borders with Pakistan, China, Bangladesh, and Myanmar. A large proportion of Indias energies with respect to foreign policy are spent on Pakistan. Ongoing border disputes exist with Pakistan, China, and Bangladesh. India has fought wars with Pakistan and China in the past. After the end of the cold war and since the Indian economic reforms the country has moved closer to the West. Relations between India and the United States as well as India and Israel have greatly improved with extensive economic, military and technological cooperation between these countries and India. The United States is arguably Indias closest ally today. India has been campaigning for a permanent seat on the UN Security Council but has not yet succeeded.

Source: Ministry of External Affairs

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Modern History
India became independent from the British on August 15th, 1947 and became a Republic on January 26th, 1950. The first Prime Minister of India was Jawaharlal Nehru. Portuguese Indian colonies of Goa, Daman and Diu were liberated through military action by Indian armed forces in 1961. One of the poorest countries in the world at the time, India embarked on a path of heavy industrialization even as most of the population was rural and depended on agriculture. In the 1960s, aided by the Ford foundation, the Indian government adopted new seeds and farming practices in what has been called the green revolution which increased crop yields by orders of magnitude and alleviated the severe food shortages facing the agricultural sector. India has been involved in three wars with Pakistan (in 1948, 1965, and 1971) and one war with China (in 1962).

Indias 1st Prime Minister with Gandhi

Parliament House

India-Pakistan War 1948

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Modern History
Indira Gandhi became the first woman Prime Minister of India in 1966. She continued the policies of state-dominated industrialization. She was recognized as a strong and decisive leader much like Margaret Thatcher. She was assassinated on 31st October, 1984. The countrys first nuclear test was carried out on May 18th, 1974 ordered by Indira Gandhi. Five further nuclear tests were carried out in May 1998. Post-independence India has faced many internal insurgencies mainly from ethnic separatist groups. Indira Gandhi was assassinated by her Sikh bodyguards as revenge for her actions against Sikh separatists. Similarly, her son Rajiv Gandhi, who was Prime Minister from 1984 to 1989, was assassinated by Tamil militants in reaction to his deployment of the Indian army in the island nation of Sri Lanka during the Tamil insurgency there. By 1991, the Indian economy was teetering on the verge of collapse and in grave danger of defaulting on its international debts. Dr. Manmohan Singh who was then the finance minister of India initiated economic liberalization policies as part of a bailout deal with the IMF. Both major political parties, the Congress and the BJP have stuck to the liberalization theme although neither has challenged agricultural subsidies and labor rules. Over the years, the widening gap between rich and poor has led to a Maoist insurgency in the eastern half of the country. The government has begun to heed advice that this is more of a social issue than a law and order problem. The insurgency is being challenged by counter-insurgency police operations and there are signs that dialogue and confidencebuilding measures are being attempted as well. Civil society has begun to put more pressure on the government and the political establishment in general to reduce corruption. The outcome of this tension is still unclear as the battle or struggle between competing interests is still underway.

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Military
As would be expected of a country this size, India has a large military. The military budget of $32 billion is a significant portion of the national budget. The country is also nuclear capable and is trying to develop a nuclear triad indigenously. While the Indian military has land launched, air-launched, and ocean surface-launch capabilities, it lacks a submarine-launch nuclear capability. As relations with the United States have improved, military cooperation between the two countries has also increased. According to the Stockholm International Peace Research Institute (SIPRI) India was the worlds largest arms importer in the period 2006-10 accounting for 9% of all global arms transfers.

Military planning is almost entirely built around fighting wars against Pakistan and China.

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Demographics
72% of the population lives in rural India. More than 50% of the population is below 25. Only the African continent is more diverse. India has over 2000 ethnic groups, every major religion is represented, and has over 216 living languages. The male/female ratio of the under 15 population is 1.098 males to 1 female and rising. This has negative social implications for the future. The middle class is estimated at around 300 million. Their consumption is not similar to the American middle class, however, no countrys middle class matches the American consumption pattern. The Indian middle class is highly price sensitive and companies that best adapt products to local needs and preferences are most likely to achieve success.

Source: U.S. Census Bureau

Religious Composition (percent)

Hindus, 80.5 Muslims, 13.4

Others, 0.8 Jains, 0.4

Christians, Sikh, 1.82.3 Buddhist, 0.8

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Economy
Transformation from an Agricultural economy to Services and Manufacturing
60.0 50.0 40.0 30.0 20.0 10.0 0.0 Agriculture Manufacturing Services

The structure of the Indian economy has changed drastically since the 1950s from an agrarian economy to one that is dominated by services and manufacturing. Agriculture has declined from 55.4% of GDP in 1951-52 to 14.6% in the period 2009-10. The economy was dominated by state-run enterprises until the reforms that began in 1991. Since then privatization, deregulation, financial market liberalization, and foreign investment have resulted in a far less government-dominated economy. investment has been encouraged. The services sector has grown to become the most important sector of the Indian economy. With its vast numbers of English-speaking, educated youth, India has become a destination of choice for outsourcing by international companies. The economic reforms have lifted many people out of poverty as well as created a large Indian middle class. However, income disparities have also widened, with little decline in the absolute numbers of the poor. These issues point to structural problems in the economy as well as the failure of government in delivering basic services such as healthcare and education to the poor.

GDP in Rs. Billions at Constant Prices

6000.0
5000.0 4000.0 3000.0 2000.0 1000.0 0.0 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

Source: Reserve Bank of India

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Agriculture Sector
Agriculture employs 52% of the countrys workforce while only contributing to 17.1% of the GDP; a fact that is reflected in the massive numbers of people living in poverty. Indian agriculture is heavily dependent on the monsoon season which is from June through September of each year. A poor rainy season usually means lower crop yields that have a very large impact on poverty and a ripple effect on the modern urban sector of the economy. India is the 2nd largest producer of fruits and vegetables after the United States. Low agricultural productivity, declining soil quality and underground water supplies, inflating input costs, and a burgeoning urban middle class that is demanding greater protein in their diet are some of the new challenges facing Indian agriculture. Many of these challenges face farmers in other countries worldwide. With over half of the countrys population tied to agriculture for a livelihood, the rainy season which is the lifeblood of Indian agriculture, has a huge effect on poverty and as a consequence, economic policy.

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Agriculture Sector Outlook

Index of Agricultural Production (Base Year 1993-94)
160 150 140 130 120 110 100 90 80

Rainfall in 2010 was good resulting in good crop yields and 2010-11 farm sector growth is estimated at 5.4%. The el Nino current has a negative influence on the Indian monsoon season. 2011 is also not an el Nino year so rainfall is expected to be normal this rainy season. We estimate agriculture sector growth to come in at between 6.5% and 7.5% in 2011.

Source: Ministry of Agiculture

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Industry
Top 10 countries by 2010 Industrial Output ($ Trillions)
0 United States China Japan Germany Brazil Italy U.K. France Russia India 1 2 3 4

India ranks 10th in the world in value of industrial output in nominal terms ($440 billion) and 4th when measured in terms of purchasing power parity (PPP) ($1.1 trillion).

The industrial base is highly diversified encompassing mining, power generation, chemicals, petrochemicals, metals, transportation equipment, machinery & equipment, paper, and textiles.
Industry accounts for 28.6% of GDP. Manufacturing makes up about 79% of total industrial output, while mining and electricity account for about 10% each. With the exception of the southeastern part of the country, western India is more industrialized than the east. Source: MOSPI, World Bank Database

Manufacturing, Mining & Electricity as % of Total Industrial Production

Mfg, 79.36

Mining, 10.47 Electricity, 10.17

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Industrial Outlook
Index of Industrial Production (2004-05 Base Year)
450.0 400.0 350.0 300.0 250.0 200.0 150.0 100.0

Industrial growth has been weak for most of the past two years and lags the spectacular growth of the service sector. However, manufacturing growth has accelerated since November 2010 and is trending upward. The industrial sector is very heavily dependent on domestic private consumption unlike China which is very dependent on exports for the health of its industry. The Reserve Bank of India has raised rates to combat inflation. One important constraint for Indian industry is electric power generation. The situation is expected to improve greatly over the next 5 years as new large power projects come online. Commodity prices and energy costs are rising worldwide which could put pressure on profit margins of Indian companies in the medium term. Industrial growth will improve slightly in 2011 over 2010 but faces the risk of European financial crisis and less than optimum growth in the United States.

50.0
0.0

Source: Ministry of Statistics & Program Implementation

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Services
Historical Segment-wise Breakup of the Service Sector Year 1951-52 1961-62 1971-72 1981-82 1991-92 2001-02 2009-10 THTC 37.8 43.4 43.3 46.3 42.1 45.1 46.6 FIRBS 25.7 22.9 20.6 20.2 26.2 25.9 30.3 CSPS 36.5 33.8 36.1 33.5 31.6 28.9 23.1 The service sector is playing an increasingly important role in the Indian economy. Services, which made up only 29% of GDP in 1951-52, grew to 57% of GDP by 2009-10. A variety of factors have contributed to this growth: economic and financial reforms, privatization, trade reform, Information Technology Enabled Services (ITES), and an overall opening up of Indian society and economy to the world. The export of ITES services, which includes software and Business Process Outsourcing (BPO) from India, has also helped to ensure consistent economic growth as the demand for these services as a cost saving measure in the west remains high. The service industry in India is well diversified due to which overall growth in the sector has been resilient even through economic troughs. From tourism, airlines and hotels, to finance, insurance and banking, the sector has shown very strong growth for decades so that it now occupies a dominant position in the Indian economy.

The Government of India classifies services as follows: THTC = Trade, Hotels, Transport & Communications FIRBS = Finance, Insurance, Real Estate, & Business Services CSPS = Community, Social & Personal Services Source: Calculated from Reserve Bank of India Data

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Services Outlook
The outlook for services in 2011 is good to the extent that the Indian financial system is nowhere nearly as exposed to the risks facing many western financial institutions. The Information Technology Enabled Services (ITES) industry is arguably one of the most visible of all Indian service Industries. It is also the one most influenced by overseas economic events. ITES exports actually declined in the immediate aftermath of the financial crisis. The 2011 forecast for services comes with the same caveats as the industrial outlook. The probability of a fresh financial crisis remains high in 2011 which would impact not only Indian software exports but hinder funds inflows that have until now fueled the growth of the sector. Absent any major external shocks like a financial crisis in Europe, the United States, or anywhere else the service sector should grow by about 6-8% in 2011.

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Deficits & Debt

Consolidated Deficit Ratio (Percent of GDP)
12

10
8 6

India has a long history of running fiscal deficits. The persistently high deficits are partly the result of the need for coalition governments to accede to the demands of a variety of constituencies. Since the 2008-09 fiscal, the consolidated deficit ratio (combined federal and state deficits) has more than doubled from 4.2% of GDP to 10.2% in 200910. In the same period the debt ratio has risen to 76% of GDP. We estimate that the consolidated deficit is expected to remain at around 10.3% of GDP and the debt ratio is expected to rise to 80% of GDP in 2011-12. Source: Reserve Bank of India

4
2 0

Debt Ratio (Percent of GDP)

82 80 78 76 74 72 70

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Balance of Payments
Current Account Trends
150000 100000 50000 US$ millions 0 -50000 -100000 -150000

India imports more than it exports resulting in consistent current account deficits. These deficits are offset by surpluses in the capital account due to foreign portfolio investment and foreign direct investment. Large upward moves in Indian capital markets are typically accompanied by large inflows of portfolio investment. Oil and petroleum imports make up almost 30% of Indias import bill. Expect rising oil prices to further erode the current account position in the 2011-12 fiscal year.

05-06 06-07 -61782 52217 -9565 07-08 -91467 75731 -15736 08-09 09-10 10-11 (e) 82021 -58551

-200000

Merchandise Invisibles Current Account

-51904 42002 -9902

-118650 -117328 -140572 89923 -28727 78917 -38411

Year

Source: Reserve Bank of India

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Conclusion: Overall Outlook

The Indian Government will continue to be under pressure to reduce corruption and remove officials guilty of wrongdoing. Relations with Pakistan will continue to be difficult. Slow but steady progress on relations with China are expected as the two countries continue to forge greater economic ties. The United States will continue to be an important economic and political ally. The agricultural sector stands a good chance of posting a second straight year of healthy growth. If yields are indeed good, food prices could moderate which would bode well for the industrial sector. Industry should post moderate gains. Much depends on food prices, export of services, and the financial situation in the advanced economies. Services will most probably continue to post healthy gains at 6-8%. Public finances will be under tremendous pressure as commodity costs continue to escalate and demands for food subsidies rise. Inflation will continue to play a major role in the economy as it is expected to do worldwide in 2011. Even though Indian exports are rising, the high cost of oil will eat into those gains and the current account deficit will continue to be negative. Barring a major financial crisis, middle class demand for goods and services will continue to post strong gains.

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