India is currently the world’s fastest-growing major economy. And before long, it may leapfrog the US on a ranking of the largest. In a new report titled “The World in 2050,” consulting firm PwC projects that India’s GDP would exceed US GDP in purchasing power parity terms by 2040 (purchasing power parity accounts for the different prices levels across countries). This would make India the largest economy in the world after China.
Currently, the economy of India is the sixth-largest economy in the world measured by nominal GDP and the third-largest by purchasing power parity (PPP). The country is classified as a newly industrialised country, one of the G-20 major economies, a member of BRICS and a developing economy with an average growth rate of approximately 7% over the last two decades. Maharashtra is the wealthiest Indian state and has an annual nominal GDP of US$250 billion, nearly equal to that of Portugal and Pakistan and accounts for 12% of the Indian GDP followed by the states of Tamil Nadu (US$150 billion) and Uttar Pradesh (US$130 billion).
Historically, India has classified and tracked its economy and GDP as three sectors — agriculture, industry and services. Agriculture includes crops, horticulture, milk and animal husbandry, aquaculture, fishing, sericulture, aviculture, forestry and related activities. Industry includes various manufacturing sub-sectors. India's definition of services sector includes its construction, retail, software, IT, communications, hospitality, infrastructure operations, education, health care, banking and insurance, and many other economic activities.
India ranks second worldwide in farm output. Agriculture and allied sectors like forestry, logging and fishing accounted for 17% of the GDP and employed 49% of the total workforce in 2014. As the Indian economy has diversified and grown, agriculture's contribution to GDP has steadily declined from 1951 to 2011, yet it is still the largest employment source and a significant piece of the overall socio-economic development of India. Crop yield per unit area of all crops has 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 the Green Revolution in India. The states of Uttar Pradesh, Punjab, Haryana, Madhya Pradesh, Andhra Pradesh, Telangana, Bihar, West Bengal, Gujarat and Maharashtra are key contributors to Indian agriculture.
India's inland water resources including 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 six million people in the fisheries sector. In 2010, India had the world's sixth largest fishing industry.
India is the largest producer in the world of milk, jute and pulses, and also has the world's second largest cattle population with 170 million animals in 2011. It is the second largest producer of rice, wheat, sugarcane, cotton and groundnuts, as well as the second largest fruit and vegetable producer, accounting for 10.9% and 8.6% of the world fruit and vegetable production respectively. India is also the second largest producer and the largest consumer of silk in the world, producing 77,000 tons in 2005. India is the largest exporter of cashew kernels and cashew nut shell liquid (CNSL). Foreign exchange earned by the country through the export of cashew kernels during 2011-12 reached Rs.4,390 crore based on statistics from the Cashew Export Promotion Council of India (CEPCI). 131,000 tonnes of kernels were exported during 2011-12. There are about 600 cashew processing units in Kollam, Kerala. India's foodgrains production remained stagnant at approximately 252 million tonnes (MT) during both the 2015-16 and 2014-15 crop years (July- June). India exports several agriculture products, such as Basmati rice, wheat, cereals, spices, fresh fruits, dry fruits, buffalo beef meat, cotton, tea, coffee and other cash crops particularly to the Middle East, Southeast and East Asian countries. It earns about 10 percent of its export earnings from this trade.
Industry accounts for 26% of GDP and employs 22% of the total workforce. According to the World Bank, India's industrial manufacturing GDP output in 2015 was 6th largest in the world on current US dollar basis ($559 billion), and 9th largest on inflation adjusted constant 2005 US dollar basis ($197.1 billion). The Indian industrial sector underwent significant changes as a result of the economic liberalisation in India economic reforms of 1991, which removed import restrictions, brought in foreign competition, led to the privatisation of certain government owned public sector industries, liberalised the Foreign direct investment (FDI) regime, improved infrastructure and led to an expansion in the production of fast-moving consumer goods. Post-liberalisation, the Indian private sector was faced with increasing domestic as well as foreign competition, including the threat of cheaper Chinese imports. It has since handled the change by squeezing costs, revamping management, and relying on cheap labour and new technology. However, this has also reduced employment generation even by smaller manufacturers who earlier relied on relatively labour-intensive processes
Petroleum products and chemicals
Petroleum products and chemicals are a major contributor to India's industrial GDP, and together they contribute over 34% of its export earnings. India hosts many oil refinery and petrochemical operations, including the world's largest refinery complex in Jamnagar that processes 1.24 million barrels of crude per day. By volume, the Indian chemical industry was the third largest producer in Asia, and it alone contributed 5% of its GDP. India is one of the top 5 world producers of agrochemicals, polymers and plastics, dyes and various organic and inorganic chemicals. Despite being a large producer and exporter of chemicals, India is a net importer of chemicals given its domestic demand for products.
The Indian pharmaceutical industry has grown in recent years to become a major manufacturer of health care products to the world. India produced about 8 per cent of the global pharmaceutical supply in 2011 by value, including over 60,000 generic brands of medicines sold around the world. It is one of the fastest-growing sub-sectors of its industry and a significant contributor of India's export earnings. The state of Gujarat has become a hub for the manufacture and export of pharmaceuticals and APIs. The industry is expected to double from its 2012 levels to US$55 billion by 2020, according to a McKinsey report.
The engineering industry of India is the largest sub-sector of its industry GDP and is one of three largest foreign exchange earning sectors for the country. It includes transport equipment, machine tools, capital goods, transformers, switchgears, furnaces, cast and forged simple to precision parts for turbines, automobiles and railways. The industry employs about four million workers. On a value-added basis, India's engineering industry sector exported $67 billion worth of engineering goods in the 2013-14 fiscal year, and served part of the domestic demand for engineering goods.
The engineering industry of India includes its growing car, motorcycle and scooters industry, as well as productivity machinery such as tractors. India manufactured and assembled about 18 million passenger and utility vehicles in 2011, of which 2.3 million were exported. India is the world's largest producer of and the largest market for tractors, accounting for 29% of world's tractor production in 2013. India is the 12th largest producer and 7th largest consumer of machine tools in the world.
Gems and jewellery
India is one of the world's largest diamonds and gem polishing and jewellery manufacturing centre; it is also one of the two largest consumers of gold. After crude oil and petroleum products, the export and import of gold, precious metals, precious stones, gems and jewellery accounts for the largest portion of India's global trade. The industry contributes about 7% of India's GDP, employs millions, and is a major source of its foreign exchange earnings. The gems and jewellery industry, in 2013, created ₹251,000 crore (US$37 billion) in economic output on value added basis. It is growing sector of Indian economy, and A.T. Kearney projects it to grow to ₹500,000 crore (US$74 billion) by 2018.
Indian gem and jewellery economy's particular strength is in precision cutting, polishing and processing small diamonds (below one carat).Yet, India is also a hub for processing of larger diamonds, pearls and other precious stones. About 11 out of 12 diamonds set in any jewellery in the world are cut and polished in India.It is also a major hub of gold and other precious metal-based precision jewellery industry. Its domestic demand for gold and jewellery products is another driver of India's GDP.
Textile industry contributes about 4 per cent to the country's GDP, 14 per cent of the industrial production, and 17 per cent to export earnings. India's textile industry has transformed from a declining sector to a rapidly developing one in recent years. After freeing the industry in 2004–2005 from a number of limitations, primarily financial, the government gave a green light to massive investment inflows – both domestic and foreign. During the period from 2004 to 2008, total investment into textile sector increased by 27 billion dollars. Ludhiana produces 90% of woollens in India and is known as the Manchester of India. Tirupur has gained universal recognition as the leading source of hosiery, knitted garments, casual wear and sportswear. Expanding textile centres such as Ichalkaranji enjoy one of the highest per capita incomes in the country. India's cotton farms, fibre and textile industry provides employment to 45 million people in India
India's mining industry was the 4th largest producer of minerals in the world by volume, and 8th largest producer by value in 2009.In 2013, it mined and processed 89 minerals, of which 4 were fuel, 3 were atomic energy minerals, and 80 non-fuel. The government owned public sector accounted for 68% of mineral produced by volume, in 2011-12.
Nearly 50% of India's mining industry, by output value, is concentrated in eight states - Odisha, Rajasthan, Chhattisgarh, Andhra Pradesh, Telangana, Jharkhand, Madhya Pradesh and Karnataka. Another 25% of the output by value comes from its offshore oil and gas resources. India operated about 3,000 mines in 2010, half of which were coal, limestone and iron ore. On output value basis, India's was one of five largest producers of mica, chromite, coal, lignite, iron ore, bauxite, barites, zinc, manganese; while being one of the 10 largest global producers of many other minerals. India was fourth largest producer of steel in the world in 2013, and seventh largest producer of aluminium.
India's mineral resources are vast. However, its mining industry has declined — contributing 2.3% of its GDP in 2010 compared to 3% in 2000, and employed 2.9 million people — a decreasing percentage of its total labour. India is a net importer of many minerals including coal. India's mining sector decline is because of complex permit, regulatory and administrative procedures that take 6 to 20 fold more time than other mining countries such as Australia and South Africa, inadequate infrastructure, shortage of capital resources, and slow adoption of ecologically and environmentally sustainable technologies.
Iron and steel
During 2014 through 2015, India was the third largest producer of raw steel and the largest producer of sponge iron in the world. The industry produced 91.46 million tons of total finished steel and 9.7 million tons of pig iron. Most iron and steel in India is produced from iron ore.
With strength of over 1.3 million active personnel, India has the world's 3rd largest military force and has the world's largest volunteer army. The total budget sanctioned for the Indian military for the financial year 2015 was ₹2.47 trillion (US$37 billion). Defence spending is expected to rise to US$620 billion by 2022.
Pulp and paper
The pulp and paper industry in India is one of the major producers of paper in the world but is outside the top 10. In recent years,India has adopted new manufacturing technology. The factors responsible for the distribution of paper industry in india is due to the availability of raw materials, transport, cheap labours and easy accessibility to the buyers. these industries are mainly found in area of Uttar Pradesh and Bihar.
India's services sector has the largest share in the GDP, accounting for 57% in 2012, up from 15% in 1950. It is the 7th largest in the world by nominal GDP, and third largest when purchasing power is taken into account. The services sector provides employment to 27% of the work force. Information technology and business process outsourcing are among the fastest-growing sectors, having a cumulative growth rate of revenue 33.6% between 1997 and 1998 and 2002–03 and contributing to 25% of the country's total exports in 2007–08.
India is the ninth largest civil aviation market in the world having a potential of becoming third largest aviation market by 2020. It recorded an air traffic of 163 million passengers in 2013, estimated to be 60 million international passengers by 2017. The market is also estimated to have 800 aircraft by 2020. In 2015, Boeing projected India's demand for aircraft to touch 1,740, valued at $240 billion, over the next 20 years in India. This would account for 4.3 per cent of global volumes. According to Airbus, India will be one of the top three aviation markets globally in the next 20 years. Airbus is expecting an annual growth rate of over 11 per cent for the domestic market in India over the next ten years, while the combined growth rate for domestic and international routes would also be more than 10 per cent.
Banking and finance
The Indian money market is classified into the organised sector, comprising private, public and foreign owned commercial banks and cooperative banks, together known as scheduled banks, and the unorganised sector, which includes individual or family owned indigenous bankers or money lenders and non-banking financial companies. The unorganised sector and microcredit are still preferred over traditional banks in rural and sub-urban areas, especially for non-productive purposes, like ceremonies and short duration loans.
The information technology industry in India consists of two major components: IT services and business process outsourcing (BPO). The sector has increased its contribution to India's GDP from 1.2% in 1998 to 7.5% in 2012. According to NASSCOM, the sector aggregated revenues of US$147 billion in 2015, where export revenue stood at US$99 billion and domestic at US$48 billion, growing by over 13%.
The growth in the IT sector is attributed to increased specialisation, and an availability of a large pool of low cost, highly skilled, educated and fluent English-speaking workers, on the supply side, matched on the demand side by increased demand from foreign consumers interested in India's service exports, or those looking to outsource their operations. The share of the Indian IT industry in the country's GDP increased from 4.8% in 2005–06 to 7% in 2008. In 2009, seven Indian firms were listed among the top 15 technology outsourcing companies in the world.
The business process outsourcing services in the outsourcing industry in India caters mainly to Western operations of multinational corporations (MNCs). As of 2012, around 2.8 million people work in outsourcing sector. Annual revenues are around $11 billion, around 1% of GDP. Around 2.5 million people graduate in India every year. Wages are rising by 10–15 percent as a result of skill shortage.
India became the 10th largest insurance market in the world in 2013, rising from 15th rank in 2011. At a total market size of US$66.4 billion in 2013, it remains small compared to world's major economies, and Indian insurance market accounts for 2% of world's annual insurance business. India's life and non-life insurance industry has been growing at 20% double digit growth rates and this growth is expected to continue through 2021. Indian economy retains about 360 million active life insurance policies, the largest in the world. Of the 52 insurance companies in India, 24 are active in life insurance business. The life insurance industry in the country is projected to increase at double digit compounded annual growth rates through 2019, with targets to reach US$1 trillion annual notional values by 2021.
The primary energy consumption in India is the third biggest after China and USA with 5.3% global share in the year 2015. Coal and crude oil together account for 85% of the primary energy consumption of India. India's oil reserves meet 25% of the country's domestic oil demand. As of April 2015, India's total proven crude oil reserves is 763.476 million metric tons, while gas reserves stood at 1,490 billion cubic metres (53 trillion cubic feet). Oil and natural gas fields are located offshore at Bombay High, Krishna Godavari Basin and the Cauvery Delta, and onshore mainly in the states of Assam, Gujarat and Rajasthan. India is the fourth largest consumer of oil in the world and net oil imports are nearly ₹820,000 crore (US$120 billion) worth of oil in 2014-15 which had an adverse effect on its current account deficit. The petroleum industry in India mostly consists of public sector companies such as Oil and Natural Gas Corporation (ONGC), Hindustan Petroleum Corporation Limited (HPCL), Bharat Petroleum Corporation Limited (BPCL) and Indian Oil Corporation Limited (IOCL). There are some major private Indian companies in the oil sector such as Reliance Industries Limited (RIL) which operates the world's largest oil refining complex.
India became the world's third largest producer of electricity in the year 2013 with 4.8% global share in electricity generation surpassing Japan and Russia. By the end of the calendar year 2015, India has become electricity surplus with many of the power stations idling for want of electricity demand. The utility electricity sector had an installed capacity of 303 GW as of 31 May 2016 of which thermal power contributed 69.8%, hydroelectricity 15.2%, other sources of renewable energy 13.0%, and nuclear power 2.1%. India meets most of its domestic electricity demand through its 106 billion tonnes of proven coal reserves. India is also rich in certain alternative sources of energy with significant future potential such as solar, wind and biofuels (jatropha, sugarcane). India's dwindling uranium reserves stagnated the growth of nuclear energy in the country for many years. Recent discoveries of natural uranium in Tummalapalle belt, which promises to be one of the top 20 of the world's reserves, and an estimated reserve of 846,477 metric tons (933,081 short tons) of thorium – about 25% of world's reserves – are expected to fuel the country's ambitious nuclear energy program in the long-run. The Indo-US nuclear deal has also paved the way for India to import uranium from other countries.
India's infrastructure and transport sector contributes about 5% of its GDP. India has a road network of over 5,472,144 kilometres (3,400,233 mi) as on 31 March 2015, the second largest road network in the world. At 1.66 km of roads per square kilometre of land, the quantitative density of India's road network is higher than that of Japan (0.91) and the United States (0.67), and far higher than that of China (0.46), Brazil (0.18) or Russia (0.08). However, qualitatively India's roads are a mix of modern highways and narrow, unpaved roads, and are being improved. As on 31 March 2015, 61.05% of Indian roads were paved. India has the lowest kilometre lane road density per 100,000 people among G-27 countries — leading to traffic congestion. It is upgrading its infrastructure. As of May 2014, India had completed and placed in use over 22,600 kilometres of recently built 4 or 6-lane highways connecting most of its major manufacturing, commercial and cultural centres. India's road infrastructure carries 60% of freight and 87% of passenger traffic.
Indian Railways is the fourth largest rail network in the world, with a track length of 114,500 kilometers and 7,172 stations. This government owned and operated railway network carried an average of 23 million passengers a day, and over a billion tonnes of freight a year. India has a coastline of 7,500 kilometres with 13 major ports and 60 operational non-major ports, which together handle 95% of the country's external trade by volume and 70% by value (rest handled by air). Nhava Sheva, Mumbai is the largest public port, while Mundra is the largest private sea port. The airport infrastructure of India includes 125 airports, of which 66 airports are licensed to handle both passengers and logistics.
Retail industry contributes between 14–15% to 20% of India's GDP. The Indian retail market is estimated to be US$600billion and one of the top five retail markets in the world by economic value. India is one of the fastest-growing retail market in the world, and is projected to reach $1.3 trillion by 2020.
India's retailing industry mostly consists of the local mother and pop store, owner manned shops and street vendors. Organised retail supermarkets are growing but small, with a market share of 4% as of 2008. In 2012 government permitted 51% FDI in multi brand retail and 100% FDI in single brand retail.
The World Travel & Tourism Council calculated that tourism generated ₹8.31 lakh crore (US$120 billion) or 6.3% of the nation's GDP in 2015 and supported 37.315 million jobs, 8.7% of its total employment. The sector is predicted to grow at an average annual rate of 7.5% to ₹18.36 lakh crore (US$270 billion) by 2025 (7.2% of GDP). India attracted 8.027 million international tourist arrivals 2015, compared to 7.679 million in 2014, a growth of 4.5%. India earned $21.07 billion in foreign exchange earnings from tourism receipts in 2015. International tourism to India has seen a steady growth, year on year, from 2.37 million arrivals in 1997 to 8.03 million arrivals in 2015. The United States is the largest source of international tourists to India, while European Union nations and Japan are other major sources of international tourists. Less than 10% of international tourists visit the Taj Mahal, with majority visiting other cultural, thematic and holiday circuits. Over 12 million Indian citizens take international trips each year for tourism, while domestic tourism within India adds about 740 million Indian travellers.
India has a fast-growing medical tourism sector of its health care economy offering low cost health and long term care. In October 2015, India's medical tourism sector was estimated to be worth US$3 billion. It is projected to grow to $7–8 billion by 2020. In 2014, 184,298 foreign patients traveled to India to seek medical treatment.
The Construction industry of India is an important indicator of the development as it creates investment opportunities across various related sectors. The construction industry has contributed an estimated ₹ 308 billion to the national GDP in 2011-12 (a share of around 19%). The industry is fragmented, with a handful of major companies involved in the construction activities across all segments; medium-sized companies specializing in niche activities; and small and medium contractors who work on the subcontractor basis and carry out the work in the field. In 2011, there were slightly over 500 construction equipment manufacturing companies in all of India. The sector is labor-intensive and, including indirect jobs, provides employment to more than 35 million people
Education in India is provided by the public sector as well as the private sector, with control and funding coming from three levels: central, state, and local.
The media and entertainment industry in India consists of many different segments under its folds such as television, print, and films. It also includes smaller segments like radio, music, OOH, animation, gaming and visual effects (VFX) and Internet advertising. Entertainment industry in India has registered an explosive growth in last two decades making it one of the fastest growing industries in India. From a single state owned channel, Doordarshan in the 1990s there are more than 400 active channels in the country.
India does not have a National health insurance or universal health care system for all its citizens which has allowed the private sector to become the dominant healthcare provider in the country. Indian healthcare professionals have the advantage of working in a very biologically active region exposing them to treatment regimens of various kinds of conditions. The quality and amount of experience is arguably unmatched in most other countries
Currently printing sector is all set to become booming in India due to available technology, resource at a very economical cost. Also government is encouraging foreign direct investment into this sector. Lot of MNC's are expected to invest in this sector due to favourable working conditions. There are numerous jobs are expected in this industry due to overall growing percentage of 12% per annum.
The telecommunication sector generated ₹2.20 lakh crore (US$33 billion) in revenue in 2014-15, accounting for 1.94% of total GDP. India is the second largest market in the world by number of telephone users (both fixed and mobile phone) with 1.053 billion subscribers as on 31 August 2016. It has one of the lowest call tariffs in the world enabled by mega telecom operators and hyper-competition among them. India has the world's third-largest Internet user-base. As on 31 March 2016, there were 342.65 million internet subscribers in the country.
Industry estimates indicate that there are over 554 million TV consumers in India as of 2012. India is the largest Direct-to-Home (DTH) television market in the world by number of subscribers. As of May 2016, there were 84.80 million DTH subscribers in the country.