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1、Basic Facts about IndiaWith a population 1 billion, India is a country of striking contrasts and enormous ethnic, linguistic, and cultural diversity. There are more than 1,600 languages, nearly 400 of which are spoken by more than 200,000 people. Many of the 25 states that make up Indias federation
2、are larger than most countries. Thirteen states have more than 20 million people, six have populations of 60 million, three exceed 80 million, and one has more than 160 million people. These states differ vastly in terms of their natural resources, administrative capacity, and economic performance.A
3、griculture plays an important, although diminishing role in the economy, accounting for about 29 percent of the countrys gross domestic product (GDP) in 1998-99 and 64 percent of the total labor force. Industry and manufacturing have expanded over the past decade. These sectors now account for about
4、 24 percent and 16 percent of GDP, respectively. The service sector has strengthened, growing from 36 percent in 1980 to about 40 percent today. Indias software subsector-one of the most dynamic in the world-has experienced a sustained rapid upswing, growing by 56 percent in 1998-99. India has made
5、enormous strides since it achieved independence more than 50 years ago. The countrys development strategy has helped eliminate famines and bring down high illiteracy and fertility rates. India has also developed a diversified industrial base and a relatively large and sophisticated financial sector.
6、 These successes have taken place against a backdrop of Indias well-established democratic system-the largest in the world-which has provided its population with an unusual degree of political freedom and stability. Yet the development strategy that produced these results emphasized import substitut
7、ion and government intervention, ultimately over-extending the public sector, and proved to be unsustainable. Protectionism isolated India from the rest of the world, and the countrys share of world trade declined from 2 percent in the 1950s to less than half of one percent in the late 1980s. The st
8、rategy also discouraged exports, created recurrent shortages of foreign exchange, and made the balance of payments extremely vulnerable to sudden changes in international markets. With economic growth thus impeded, poverty reduction also lagged. By the early 1990s, India was in the midst of severe f
9、iscal and trade imbalances and double-digit inflation, and was on the verge of defaulting on its external debt obligations. ECONOMIC DEVELOPMENTS In June 1991, the country changed course, effectively ending four decades of government-led growth. The new approach focused on stabilizing the economy; b
10、egan reforming the investment, trade and tax regimes, the financial sector, and public enterprises; and gave the private sector a much greater role in Indias development. This economic program produced appreciable results. Initially, growth declined sharply in response to the contractionary fiscal a
11、nd monetary policies adopted to address the crisis. The reforms and good monsoons helped growth rebound to 5 percent in 1992-94. For three consecutive years, GDP grew at over 7 percent between 1994-96, placing India among the worlds best performing economies. Underpinning the economys strong perform
12、ance are important structural transformations. The declining economic role of the public sector since the start of the reform program in 1991 is probably Indias most fundamental structural change since independence. Areas that were previously the exclusive domain of the public sector, such as heavy
13、manufacturing, banking, civil aviation, telecommunications, power generation and distribution, ports and roads, are now opening to the private sector. Equally important, the liberalization of the economy has reduced distortions and increased external and internal competition as seen recently in the
14、introduction of deregulation measures for insurance, urban land, agricultural exports, and foreign exchange, and cuts in red tape for foreign investors. Unlike previous episodes of economic growth, the recent expansion has been driven by private investment. Such investment has reached an historicall
15、y high level and accounts for a major portion of total investment in the country. In addition, India has begun to attract foreign investment, and at $2.4 billion in 1998-99, foreign direct investment is about 20 times higher than it was before the economy was liberalized. In 1997-98, although the In
16、dian economy continued to exhibit considerable underlying strength, growth fell to 5 percent due to a decline in agricultural production, and slowing exports and industrial growth. In 1998-99, GDP growth rose to 6.0 percent, primarily due to a jump in agricultural production. However, the turmoil in international markets and investors concerns over the implications of foreign reaction to Indias nuclear tests led
