Indian Economy: An Overview

India's economy is on the fulcrum of an ever-increasing growth curve. With positive indicators such as a stable 8 percent annual growth, rising foreign exchange reserves of close to US$ 140 billion, a booming capital market, flowing foreign direct investment (FDI) close to US$ 8 billion and a more than 20 percent surge in exports, it is easy to grasp why India is a leading destination for foreign investment.

Growth of Gross Domestic Product (GDP) at constant prices in excess of 8% has been achieved by the economy in only 5 years of recorded history and 2 out of these five are in the last three years. The agricultural and allied sector's growth is projected at 2.3% and total agricultural production is expected to increase to 209 million tons.

Some significant dimensions of the dynamic growth in recent years are: a new industrial resurgence pick up in investment, modest inflation in spite of spiraling global crude prices; rapid growth in exports/imports with a widening of the current account deficit; laying of some institutional foundations for faster development of physical infrastructure; progress in fiscal consolidation and the launching of the National Rural Employment Guarantee Scheme (NREG) for inclusive growth and social security.

The industrial growth has been an impressive rate of 7.8%, especially in the manufacturing sector. India is the world's second largest producer of food next to China with food processing as the key sector, which accounts for gross output of more than US$ 69.4 billion, out of which value-added food products comprise US$ 22.2 billion. Industrial growth is also driven by robust performances from manufacturing and construction sectors with an annual growth rate of 7-9% and in double digits respectively. India's merchandise exports have been recording annual growth rates of more than 20% to cross US$ 80 billion. Five major sectors - gems and jewellery, engineering goods, petroleum products, ores and minerals and chemicals and related products - were the key drivers. Services exports grew by more than 71% becoming a major driving force for the Indian economy. India is the largest producer of milk, fruits, pulses, cashew nut, coconut and tea in the world, second largest producer of rice and wheat, fourth largest in coarse grains. India is also one of the largest producers of cotton, sugar, sugarcane, peanuts, jute and assortment of spices. India now has 14 biotech crops under development in India since 2005.

With the economy growing at the pace of 8%, growth in the consumer market has received further impetus by the fact that a large proportion of the consumers are in the 18-35 years age group with a propensity to spend. As a result, the size of the market is currently estimated at 300 million and is expected to grow to 450 million.

Economic Indicators

	2005-06	Growth, %
GDP at factor cost at current prices	3200.6 (Rs. Thousand crore) 723163 (US$ million)	12.5
At 1999-00 prices	2586.6 (Rs. Thousand crore) 584542.3 (US$ million)	8.1
Agriculture and allied sectors	508.6 (Rs. Thousand crore) 114937.8 (US$ million)	12.5
Food grains production	209.3 (Million tonnes)	2.3
Index of industrial production	215.4	7.8
Electricity generated	458.6 (Billion kwh)	4.7
Wholesale price index (on February 4, 2006)	196.2	4.1
Consumer price index for industrial workers (December 2005)	550	5.6
Money supply (on January 20, 2006)	2551.9 (Rs. Thousand crore) (Outstanding at the end of financial year) 576700.5 (US$ million)	16.4
Imports at current prices (April 2005 - Jan 2006)	108,803 (US$ million)	26.7
Exports at current prices (April 2005 - Jan 2006)	74,978 (US$ million)	18.9
Foreign currency assets (by end January 2006)	133,770 (US$ million)	8.2