India remained relatively unscathed from the 1997- 98 Asian financial sector crises and has maintained a healthy growth rate of over 5 per cent despite recession in major world economies over the past two years. This demonstrates the size, strength and resilience of the Indian economy.
India’s GDP for the year 2001-02 was US$ 422 billion. The real GDP growth varied between 6 to 8 per cent per annum (average 6.5 per cent per annum), during the 1990s.
Were it not for the resilience of China and India, the world economy would have been in deep recession in 2002.
The sectoral composition of GDP reflects a transition. While the agricultural and industrial sectors have continued to grow, the services sector has grown at a significantly higher pace – it currently contributes nearly half of India’s GDP.
On the external front, cumulative foreign investment inflows have been US$ 50 billion since 1991. This includes over US$ 28 billion of Foreign Direct Investment (FDI) and about US$ 22.6 billion in portfolio investment.
India’s foreign exchange reserves have risen significantly to over US$ 68 billion by the end of December 2002. This has provided the much needed stability to the exchange rate and strengthening of the rupee.
The external debt to GDP ratio of the country has improved significantly from 38.7 per cent in 1992 to around 22.3 percent in 2001. Among developing countries, India has one of the lowest external debts to GDP ratios.
The value of foreign trade has increased substantially. Both exports from and imports into India are increasing. The total volume of foreign trade in 2001-02 was over US$ 95 billion. In order to boost exports and attract foreign investments, the government had announced in April 2000 the establishment of Special Economic Zones (SEZs) policy. The SEZs would offer world class infrastructure, attractive financial and tax incentives and procedural ease of a duty-free trading area. For all practical Purposes, units located in the SEZs are given deemed foreign territory treatment.
A unique feature of the transition of the Indian economy has been an element of high growth with stability. Both at the central and state levels and across political affiliations of the Indian federal and state polity, there is consensus on further economic liberalization. The reforms programme and the market oriented policies of the government are irreversible.
India’s current economic growth is likely to soon push it into the position as the 5th biggest economy in the world. Already in terms of purchasing power the Indian economy is ranked as the third largest Economic growth is currently averaging 5-6% and there are signs that this is likely to continue in the future.