INDIAN ECONOMY BASICS: A Primer for the Novice India-Watcher
Decades of protectionist barriers that kept foreign businesses out, and private investors at bay, are crumbling under Indias new economic reform policies. But the future remains as uncertain as tomorrows value of the rupee.
If variety is the spice of life, then India is a gourmet's delight. This young South Asian giant is home to more than 900 million people, a cacophony of languages, extremes of lavish wealth and grinding poverty, untouched natural beauty and landscapes devastated by overpopulation. About 16 % of the worlds population lives in India.
About 16 % of the worlds population lives in India.
English is the Lingua Franca of the country, even though Hindi is the National language and primary tongue of 30 % of the people
In Bombay, the capital of India's financial markets, vast slums sit on some of the most expensive real estate in the world. If newcomers can foot the rent bill, they are well on their way to a seat on the Bombay Stock Exchange (BSE). In 1991, India had an estimated slum population of 51.23 million . This formed 21.1 % of the total urban population.
The political scene is as uncertain as tomorrow's value of the rupee, but this has not stopped foreign investors from flooding in.
For decades following the departure of the English, India kept the door closed to foreign investors, striving for a kind of Gandhian self-sufficiency or "swadeshi" that had inspired the Independence movement.
Policy-makers favored socialist economic planning with limited free-marketeering. The infrastructure, utilities, banking and other key industries remained under state control, while private companies moved into agriculture, industry and the production of consumer goods.
As Five Year Plans came and went, India's economy stagnated at a growth rate of three percent per year. The government borrowed and spent heavily to keep the wolf from the door.
In 1991, India had an estimated slum population of 51.23 million . This formed 21.1 % of the total urban population
The burden of a heavy bureaucracy and state enterprises running at a perennial loss became too heavy to bear. By 1990 the state coffers were nearly empty. Foreign exchange reserves were at an all time low. In desperation, the government turned to the World Bank and the International Monetary Fund (IMF).
The World Bank and the IMF agreed to bail India out of its financial mess on the condition that India join the growing roster of nations on Structural Adjustment Programmes.
Policy reforms encouraging foreign investment have since opened the doors to global play. Slowly but surely, a vital economy is breaking through India's ossified bureaucracy. In a mere five years India has leapt from a mere curiosity on the global economic map to one of the world's top ten emerging markets.