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India's economy has recently recovered and gained momentum. Economic growth in the financial year 2014/2015 stood at 7.4 percent. The GDP for the same period stood at 2.182 trillion USD, making India the 7th largest economy in the world.
Despite structural deficiencies India is thus still one of the fastest growing economies. Compared to other BRICS countries, India large population and favourable demographics, may present ideal conditions for long term growth.
India is facing enormous challenges in reducing poverty and improving education and infrastructure. The average annual per capita income is 1400 USD. And approximately 30 percent of the huge population lives below the poverty line of 1 USD per capita per day. About 70 percent have less than 2 US dollars per day. This goes on to show the staggering income disparity in the country. On the Human Development Index of the UNDP India ranks 135 among the 187 countries assessed. While it is home to the most millionaires and billionaires in the world, India is in many social indicators is well below the averages of sub-Saharan Africa.
Among the main characteristics of the Indian economy are the mismatch between GDP and share of employment in agriculture and services and a relatively low importance given to the processing industry. The vast majority of the Indian population lives in rural farm structures and remains economically disadvantaged and distanced. The share of agriculture in the Indian economy performance has been decreasing continuously for years and only amounts to about 17.6 percent (2014/15) of the overall economy. Despite this, around 50 percent of India's labour force is working in this field. Given the lack of capital, small acreage, stagnating income and a lack of viable sales structures the sector remains the main concern of the Indian government.
The growth of the Indian is almost exclusively attributed to the services sector which has a share of over 60 percent in the country’s GDP. But with a share of employment of only about 30 percent, it benefits only a small part of the population.
A number of sectors, particularly oil, gas, coal, heavy industry, transport, banking and insurance, however, remain largely dominated by public or semi-public companies. The Government has announced privatization schemes for many of these entities but so far it has been met by resistance from the inefficiently large number of workers employed there.
The Indian foreign trade has grown strongly in the last two decades; the GDP share of foreign trade increased from about 23 percent in fiscal year 2000/01 to 43 percent in 2014/15. India's exports have almost tripled over the same period. The Indian share of world trade reached about 1.6 percent in exports and 2.47 percent in imports in 2013, according to WTO figures.
Why invest in India?
- India is slated to be one of the fastest growing economies in the world for at least the next two decades. The chief driver for this growth is going to be India’s huge, young population. With a median age of just 25, India is one of the youngest countries in the world. This will allow for an increase in the working age population down the line.
- India’s central bank basis its emphasis on controlling inflation. This allows the bank to cut the interest basis points easily when the need arises, which makes the investment environment more feasible. (The inflation rate in India fell roughly 50 percent between 2013 and 2015 to come to 5.22 percent)
- The government is introducing several reforms to grow the Foreign Direct Investment in the country. These include streamlined tax rates, direct transfer subsidies, increased power generation among others.
- India is home to one of the cheapest labour forces in the region.