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| GDP (Gross Domestic Product) PPP (Purchasing Power Parity) per capita in the world. (Photo credit: Wikipedia) |
Alongside those of Brazil, Russia, China and South Africa, the Indian economy forms BRICS, the group of nations with the fastest growing economies in the world. These nations represent the next generation of economic superpowers, however, India and China in particular are already establishing themselves amongst the largest and most potent industrial powers on the planet.
The Statistics
The considered size of the Indian economy varies depending on which metric is used to gauge it. According to the latest measurements of Gross Domestic Product - a reading of the output of a nation’s workforce - it is currently the ninth largest economy in the world. Moreover, when the figures are adjusted to take into account the true value of wealth in each country and the Purchasing Power Parity variant of GDP (GDP PPP) is used, India’s economy can already be considered as the third largest on the world stage. There is a real disparity however between this collective strength and the prosperity of individuals within the country. When these measurements are looked at per capita, they show that India’s population sit (on average) outside of the top one hundred wealthiest and so, in fact, can be considered one of the poorest populations despite the fact that recent economic success has doubled the hourly wage in last decade.
Growth in the Indian economy has really surged following the liberalisation of trade and employment rules in the early 1990s and a subsequent shift towards more capitalist sensibilities. These policies have essentially unlocked the country’s extensive natural resources, space and land as well as a relatively inexpensive labour force (the second largest work force in the world) who are consequently becoming better educated and more affluent. What’s more this affluent population are, in turn, increasing the size of the internal consumer market and the resultant growth in the Indian economy from all of these factors is now averaging around 7.5% a year.
Economic Sectors
Many in the West may envisage that India’s economy is mostly made up of large manufacturing industries or large scale agriculture. These sectors do play an important role in India’s prosperity, particularly agriculture which accounts for 28% of the nation’s output; making use of the vast tracts of land to produce arable crops. Manufacturing and industry however, perhaps surprisingly, only accounts for 18% of the country’s output despite the fact that some of India’s most prominent businesses and global names operate in these markets as, for example, steel suppliers or car manufacturers. India is indeed the second largest growing car producer in the world and still acts as a major (and growing) force in manufacturing and industry on the world stage.
The dominant sector in the Indian economy, as it tends to be in western economies, is the service sector, accounting for 54% of GDP. The most familiar element of that sector to us in the UK may well be the Indian call centre. Over the last few years, countless European and American businesses have spotted the opportunities to move their support services across to India to take advantage of the lower labour costs, good communications infrastructure and educated talent pool for whom English is a prevalent language. However, India is also a leading light in the information technology industries, proving a real challenger to the US as the global player for third party IT services; not to mention possessing established and well developed financial services and banking industries.
For some, the growth in economies across Asia, particularly those of China and India mean that can be considered the right time to investigate investment opportunities, such as Asian Investment Funds, whilst the European investment markets continue to suffer the effects of the recent economic troubles. The Indian economy is certainly on course to become, if it isn't already, one of the most prominent in world trade.
© Stuart Mitchell 2012
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