Economy of India

The economy of India is a developing mixed economy with a notable public sector in strategic sectors. It is the world's fourth-largest economy by nominal GDP and the third-largest by purchasing power parity (PPP); on a per capita income basis, India ranked 136th by GDP (nominal) and 119th by GDP (PPP). From independence in 1947 until 1991, successive governments followed the Soviet model and promoted protectionist economic policies, with extensive Sovietization, state intervention, demand-side economics, natural resources, bureaucrat-driven enterprises and economic regulation. This was a form of the Licence Raj. The end of the Cold War and an acute balance of payments crisis in 1991 led to the adoption of a broad economic liberalisation in India and indicative planning. India has about 1,900 public sector companies, with the Indian state having complete control and ownership of railways and highways. The Indian government has major control over banking, insurance, farming, fertilizers and chemicals, airports, essential utilities. The state also exerts substantial control over digitalization, telecommunication, supercomputing, space, port and shipping industries, which were effectively nationalised in the mid-1950s but has seen the emergence of key corporate players.

Nearly 70% of India's GDP is driven by domestic consumption; the country remains the world's third-largest consumer market. Aside private consumption, India's GDP is also fueled by government spending, investments, and exports. In 2022, India was the world's 10th-largest importer and the 8th-largest exporter. India has been a member of the World Trade Organization since 1 January 1995. It ranks 63rd on the ease of doing business index and 40th on the Global Competitiveness Index. India has one of the world's highest number of billionaires along with extreme income inequality. Economists and social scientists often consider India a welfare state. India's overall social welfare spending stood at 8.6% of GDP in 2021-22, which is much lower than the average for OECD nations. With 586 million workers, the Indian labour force is the world's second-largest. Despite having some of the longest working hours, India has one of the lowest workforce productivity levels in the world. Economists say that due to structural economic problems, India is experiencing jobless economic growth.

During the Great Recession, the economy faced a mild slowdown. India endorsed Keynesian policy and initiated stimulus measures (both fiscal and monetary) to boost growth and generate demand. In subsequent years, economic growth revived.

In 2021–22, the foreign direct investment (FDI) in India was $82 billion. The leading sectors for FDI inflows were the Finance, Banking, Insurance and R&D. India has free trade agreements with several nations and blocs, including ASEAN, SAFTA, Mercosur, South Korea, Japan, Australia, the United Arab Emirates, and several others which are in effect or under negotiating stage.

The service sector makes up more than 50% of GDP and remains the fastest growing sector, while the industrial sector and the agricultural sector employs a majority of the labor force. The Bombay Stock Exchange and National Stock Exchange are some of the world's largest stock exchanges by market capitalisation. India is the world's sixth-largest manufacturer, representing 2.6% of global manufacturing output. Nearly 65% of India's population is rural, and contributes about 50% of India's GDP. India faces high unemployment, rising income inequality, and a drop in aggregate demand. India's gross domestic savings rate stood at 29.3% of GDP in 2022.

For a continuous duration of nearly 1700 years from the year 1 CE, India was the world's largest economy, constituting 35 to 40% of the world GDP. The combination of protectionist, import-substitution, Fabian socialism, and social democratic-inspired policies governed India for sometime after the end of British rule. The economy was then characterised as Dirigism, It had extensive regulation, protectionism, public ownership of large monopolies, pervasive corruption and slow growth. Since 1991, continuing economic liberalisation has moved the country towards a market-based economy. By 2008, India had established itself as one of the world's faster-growing economies.

The citizens of the Indus Valley civilisation, a permanent settlement that flourished between 2800 BCE and 1800 BCE, practised agriculture, domesticated animals, used uniform weights and measures, made tools and weapons, and traded with other cities. Evidence of well-planned streets, a drainage system, and water supply reveals their knowledge of urban planning, which included the first-known urban sanitation systems and the existence of a form of municipal government.

Maritime trade was carried out extensively between southern regions of India and Southeast Asia and West Asia from early times until around the fourteenth century CE. Both the Malabar and Coromandel Coasts were the sites of important trading centres from as early as the first century BCE, used for import and export as well as transit points between the Mediterranean region and southeast Asia. Over time, traders organised themselves into associations which received state patronage. This state patronage for overseas trade came to an end by the thirteenth century CE, when it was largely taken over by the local Parsi, Jewish, Syrian Christian, and Muslim communities, initially on the Malabar and subsequently on the Coromandel coast.