The economy of India has transitioned from a mixed planned economy to a mixed middle-income developing social market economy with notable state participation in strategic sectors and indicative planning. It is the world’s fifth-largest economy by nominal GDP and the third-largest by purchasing power parity (PPP).
The Indian economy is a mixed economy, with a blend of socialism and capitalism. India adopted a socialist economic model after its independence in 1947, which emphasized the role of the public sector in the economy. However, in the 1990s, India initiated economic reforms to liberalize the economy and promote private investment.
Indian Economy Overview
| GDP | $3.75 trillion (nominal; 2023 est.) $13.033 trillion (PPP; 2023 est.) |
| GDP rank | 5th (nominal; 2023) 3rd (PPP; 2023) |
| GDP growth | 9.1% (2021) 7.2% (2022) 6.1% (Q4 2022-23) 6.5% (2023f) 6.2% (2024f) |
| GDP per capita | $2,601 (nominal; 2023 est.) $9,073 (PPP; 2023 est.) |
| GDP per capita rank | 139th (nominal; 2023) 127th (PPP; 2023) |
| GDP by sector | Agriculture: 18.8% Industry: 28.2% Services: 53% (FY 2021-22) |
| GDP by component | Private final consumption: 57.2% Government final consumption: 10.3% Gross fixed capital formation: 33.9% Exports of goods and services: 22.7% Imports of goods and services: -29.7% Other source: 5.7% (FY 2022–23) |
| Inflation (CPI) | 4.81% (June 2023) |
| Base borrowing rate | 4.50% (26 May 2023) |
| Unemployment | 8.45% (June 2023) |
| Gross savings | 29.345% of GDP (2022) |
| Yield curve | 10-year bond 7.278% (Jan 2023) |
| Main industries | Textiles chemicals food processing steel transportation equipment cement mining petroleum machinery software pharmaceuticals |
| Export goods | Manufacturers: 70.7% Fuels and mining products: 14.7% Agricultural products: 14.1% Others: 0.5% (2022) |
| Main export partners | United States: 18.1% European Union: 14.9 United Arab Emirates: 6.4% China: 5.8% Bangladesh: 3.6% Other: 51.1% (FY 2021-22) |
| Import goods | Agricultural products: 7% Fuels and mining products: 33.2% Manufacturers: 52.1% Other: 7.7 % (2022) |
| Main import partners | China: 14.07% United Arab Emirates: 7.43% United States: 7.21% Russia: 6.32% Saudi Arabia: 5.97% Other: 59% (FY 2022-23) |
Some key features of the Indian economy
- Agriculture: Agriculture is a significant sector in the Indian economy, employing around 50% of the workforce. The main crops grown in India include rice, wheat, pulses, sugarcane, and cotton.
- Manufacturing: The manufacturing sector is the second-largest sector in the Indian economy, accounting for around 17% of GDP. The sector includes industries such as textiles, chemicals, pharmaceuticals, and automobiles.
- Services: The services sector is the largest sector in the Indian economy, contributing around 54% of GDP. The sector includes industries such as IT, banking, finance, and tourism.
- Demographics: India has a young population, with around 65% of the population below the age of 35. This demographic advantage is expected to drive the growth of the Indian economy in the coming years.
- Infrastructure: India has made significant investments in infrastructure in recent years, including the development of highways, airports, and ports. However, there is still a significant need for infrastructure development in the country.
- Foreign investment: India has opened up its economy to foreign investment, and has attracted significant foreign investment in recent years. The government has taken several measures to improve the ease of doing business in India, including the introduction of the Goods and Services Tax (GST) and the liberalization of foreign investment rules.
- Challenges: Despite significant progress in recent years, the Indian economy still faces several challenges. These include high levels of poverty, income inequality, and unemployment. Additionally, the country faces challenges related to infrastructure development, corruption, and bureaucratic red tape.
Overall, the Indian economy has made significant progress in recent years and is expected to continue growing in the coming years. However, there is still a significant need for reforms to address the challenges faced by the country and to ensure sustainable economic growth.
MCQs on Economy of India
- Which organization is responsible for formulating India’s monetary policy?
a) Reserve Bank of India (RBI)
b) Ministry of Finance
c) Securities and Exchange Board of India (SEBI)
d) Planning Commission of India
Answer: a) Reserve Bank of India (RBI) - What is the primary objective of India’s Five-Year Plans?
a) Achieving social equality
b) Ensuring political stability
c) Promoting industrial growth
d) Achieving rapid economic development
Answer: d) Achieving rapid economic development - Which sector in India employs the highest percentage of the labor force?
a) Agriculture
b) Manufacturing
c) Services
d) Construction
Answer: a) Agriculture - The Goods and Services Tax (GST) in India is a:
a) Central tax only
b) State tax only
c) Dual tax system, involving both the central and state governments
d) Local tax collected by municipalities
Answer: c) Dual tax system, involving both the central and state governments - India’s “Make in India” initiative aims to promote:
a) Foreign investments only
b) Domestic manufacturing and entrepreneurship
c) Information technology and software services
d) Agricultural exports
Answer: b) Domestic manufacturing and entrepreneurship - Which index is used to measure the performance of the stock market in India?
a) Nifty
b) Sensex
c) NASDAQ
d) Dow Jones
Answer: b) Sensex - The largest share of India’s national income is earned from which sector?
a) Agriculture
b) Manufacturing
c) Services
d) Tourism
Answer: c) Services - Which government body is responsible for formulating India’s fiscal policies?
a) Ministry of Finance
b) Reserve Bank of India (RBI)
c) Planning Commission of India
d) Securities and Exchange Board of India (SEBI)
Answer: a) Ministry of Finance