India Market

Background Note: India

Geography
Area: 3.29 million sq. km. (1.27 million sq. mi.); about one-third the size of the U.S.
Cities: Capital--New Delhi (pop. 12.8 million, 2001 census). Other major cities--Mumbai, formerly Bombay (16.4 million); Kolkata, formerly Calcutta (13.2 million); Chennai, formerly Madras (6.4 million); Bangalore (5.7 million); Hyderabad (5.5 million); Ahmedabad (5 million); Pune (4 million).
Terrain: Varies from Himalayas to flat river valleys and deserts in the west.
Climate: Alpine to temperate to subtropical monsoon.

People
Nationality: Noun and adjective--Indian(s).
Population (2012 est.): 1.21 billion; urban 29%.
Annual population growth rate (2012 est.): 1.312%.
Density: 324/sq. km.
Ethnic groups: Indo-Aryan 72%, Dravidian 25%, others 3%. While the national census does not recognize racial or ethnic groups, it is estimated that there are more than 2,000 ethnic groups in India.
Religions (2001 census): Hindu 80.5%; Muslim 13.4%; Christian 2.3%; Sikh 1.9%; other groups including Buddhist, Jain, Parsi within 1.8%; unspecified 0.1%.
Languages: Hindi, English, and 16 other official languages.
Education: Years compulsory--K-10. Literacy--61%.
Health: Infant mortality rate--46.07/1,000. Life expectancy--67.14 years (2012 est.).
Workforce(est.):467million. Agriculture--52%; industryand commerce--14%; services and government--34%.

Although India occupies only 2.4% of the world's land area, it supports over 15% of the world's population. Only China has a larger population. India's median age is 25, one of the youngest among large economies. About 70% live in more than 550,000 villages, and the remainder in more than 200 towns and cities. Over the thousands of years of its history, India has been invaded from the Iranian plateau, Central Asia, Arabia, Afghanistan, and the West; Indian people and culture have absorbed and modified these influences to produce a remarkable racial and cultural synthesis.

Religion, caste, and language are major determinants of social and political organization in India today. However, with more job opportunities in the private sector and better chances of upward social mobility, India has begun a quiet social transformation in this area. The government has recognized 18 official languages; Hindi, the national language, is the most widely spoken, although English is a national lingua franca. Although about 80% of its people are Hindu, India also is the home of more than 138 million Muslims--one of the world's largest Muslim populations. The population also includes Christians, Sikhs, Jains, Buddhists, and Parsis.

The Hindu caste system reflects Indian occupational and socially defined hierarchies. Ancient Sanskrit sources divide society into four major categories, priests (Brahmin), warriors (Kshatriya), traders/artisans (Vaishya) and farmers/laborers (Shudra). Although these categories are understood throughout India, they describe reality only in the most general terms. They omit, for example, the tribal people and those outside the caste system formerly known as "untouchables”, or dalits. In reality, Indian society is divided into thousands of jatis--local, endogamous groups based on occupation--and organized hierarchically according to complex ideas of purity and pollution. Discrimination based on caste is officially illegal, but remains prevalent, especially in rural areas. Nevertheless, the government has made strong efforts to minimize the importance of caste through active affirmative action and social policies. Moreover, caste is often diluted if not subsumed in the economically prosperous and heterogeneous cities, where an increasing percentage of India's population lives. In the countryside, expanding education, land reform and economic opportunity through access to information, communication, transport, and credit are helping to lessen the harshest elements of the caste system.

Government
Type: Federal republic.
Independence: August 15, 1947.
Constitution: January 26, 1950.
Branches: Executive--president (chief of state), prime minister (head of government), Council of Ministers (cabinet). Legislative--bicameral parliament (Rajya Sabha or Council of States, and Lok Sabha or House of the People). Judicial--Supreme Court.
Political parties: Indian National Congress (INC), Bharatiya Janata Party (BJP), Communist Party of India-Marxist, and numerous regional and small national parties.
Political subdivisions: 28 states,* 7 union territories (including National Capital Territory of Delhi).
Suffrage: Universal over 18.

According to its constitution, India is a "sovereign, socialist, secular, democratic republic." Like the United States, India has a federal form of government. However, the central government in India has greater power in relation to its states, and has adopted a British-style parliamentary system.

The government exercises its broad administrative powers in the name of the president, whose duties are largely ceremonial. A special electoral college elects the president and vice president indirectly for 5-year terms. Their terms are staggered, and the vice president does not automatically become president following the death or removal from office of the president.

Real national executive power is centered in the cabinet (senior members of the Council of Ministers), led by the prime minister. The president appoints the prime minister, who is designated by legislators of the political party or coalition commanding a parliamentary majority in the Lok Sabha (lower house). The president then appoints subordinate ministers on the advice of the prime minister.

India's bicameral parliament consists of the Rajya Sabha (Council of States) and the Lok Sabha (House of the People). The Council of Ministers is responsible to the Lok Sabha.

The legislatures of the states and union territories elect 233 members to the Rajya Sabha, and the president appoints another 12. The members of the Rajya Sabha serve 6-year terms, with one-third up for election every 2 years. The Lok Sabha consists of 545 members, who serve 5-year terms; 543 are directly elected, and two are appointed.

India's independent judicial system began under the British, and its concepts and procedures resemble those of Anglo-Saxon countries. The Supreme Court consists of a chief justice and 25 other justices, all appointed by the president on the advice of the prime minister.

India has 28 states* and 7 union territories. At the state level, some legislatures are bicameral, patterned after the two houses of the national parliament. The states' chief ministers are responsible to the legislatures in the same way the prime minister is responsible to parliament.

Each state also has a presidentially appointed governor, who may assume certain broad powers when directed by the central government. The central government exerts greater control over the union territories than over the states, although some territories have gained more power to administer their own affairs. Local governments in India have less autonomy than their counterparts in the United States. Some states are trying to revitalize the traditional village councils, or panchayats, to promote popular democratic participation at the village level, where much of the population still lives. Over half a million panchayats exist throughout India.

Principal Government Officials
President--Pratibha D. Patil
Vice President--Mohammed Hamid Ansari
Prime Minister--Manmohan Singh
Minister for Home Affairs--P. Chidambaram
Minister of External Affairs--S.M. Krishna
Ambassador to the U.S.--Nirupama Rao
Ambassador to the UN--Hardeep Singh Puri

Economy
GDP (FY 2011 est.): $1.843 trillion.
Real growth rate (2011 est.): 7.8%.
Per capita GDP (PPP, FY 2011 est.): $3,700.
Natural resources: Coal, iron ore, manganese, mica, bauxite, chromite, thorium, limestone, barite, titanium ore, diamonds, crude oil.
Agriculture: 18.1% of GDP. Products--wheat, rice, coarse grains, oilseeds, sugar, cotton, jute, tea.
Industry: 26.3% of GDP. Products--textiles, jute, processed food, steel, machinery, transport equipment, cement, aluminum, fertilizers, mining, petroleum, chemicals, and computer software.
Services and transportation: 55.6% of GDP.
Trade: Exports (FY 2011 est.)--$298.2 billion; engineering goods, petroleum products, precious stones, cotton apparel and fabrics, gems and jewelry, handicrafts, tea. Services exports ($101.2 billion in 2008-2009) represent more than one-third of India's total exports.Software exports (FY 2009)--$35.76 billion. Imports (FY 2011 est.)--$451 billion; petroleum, machinery and transport equipment, electronic goods, edible oils, fertilizers, chemicals, gold, textiles, iron and steel. Major trade partners--U.S., China, U.A.E., EU, Russia, Japan.

For 2011, India's estimated GDP was $1.843 trillion with 7.8% growth. Services, industry, and agriculture account for 56%, 26%, and 18% of GDP, respectively. India's population is estimated at 1.2 billion and is growing at 1.3% a year. The country is capitalizing on its large numbers of well-educated people skilled in the English language to become a major exporter of software services and software workers, but more than half of the population depends on agriculture for its livelihood. 700 million Indians live on $2 per day or less, but there is a large and growing middle class of more than 50 million Indians with disposable income ranging from 200,000 to 1,000,000 rupees per year ($4,166-$20,833). Estimates are that the middle class will grow tenfold by 2025.

India continues to move forward, albeit haltingly, with market-oriented economic reforms that began in 1991. Reforms include increasingly liberal foreign investment and exchange regimes, industrial decontrol, reductions in tariffs and other trade barriers, opening and modernization of the financial sector, significant adjustments in government monetary and fiscal policies, and more safeguards for intellectual property rights.

The economy has posted an average growth rate of more than 7% in the decade since 1997, reducing poverty by about 10 percentage points. India achieved 9.6% GDP growth in 2006, 9.0% in 2007, and 6.6% in 2008, significantly expanding manufactures through late 2008. The country weathered the 2008-2009 global financial crisis well. Estimated GDP growth was 6.5% for 2009. Foreign portfolio and direct investment inflows have risen significantly in recent years. They contributed to the $283.5 billion in foreign exchange reserves by December 2009. Government receipts from the 34-day 3G spectrum auction in 2010 were $14.6 billion.

Economic growth is constrained by inadequate infrastructure, a cumbersome bureaucracy, corruption, labor market rigidities, regulatory and foreign investment controls, the "reservation" of key products for small-scale industries, and high fiscal deficits. The outlook for further trade liberalization is mixed, and a key World Trade Organization (WTO) Doha Ministerial in July 2008 was unsuccessful due to differences between the U.S. and India (as well as China) over market access. India eliminated quotas on 1,420 consumer imports in 2002 and incrementally lowered non-agricultural customs duties in later budgets. However, the tax structure is complex, with compounding effects of various taxes.

U.S.-India bilateral merchandise trade in 2008 topped nearly $50 billion. Principal U.S. exports are diagnostic or lab reagents, aircraft and parts, advanced machinery, cotton, fertilizers, ferrous waste/scrap metal, and computer hardware. Major U.S. imports from India include textiles and ready-made garments, Internet-enabled services, agricultural and related products, gems and jewelry, leather products, and chemicals.

The rapidly growing software sector is boosting service exports and modernizing India's economy. Software exports surpassed $35 billion in FY 2009, while business process outsourcing (BPO) revenues hit $14.8 billion in 2009. Personal computer penetration is 14 per 1,000 persons. The number of cell phone users was expected to rise to nearly 300 million by 2010.

The United States is India's largest investment partner, with a 13% share. India's total inflow of U.S. direct investment was estimated at more than $16 billion through 2008. Proposals for direct foreign investment are considered by the Foreign Investment Promotion Board and generally receive government approval. Automatic approvals are available for investments involving up to 100% foreign equity, depending on the kind of industry. Foreign investment is particularly sought after in power generation, telecommunications, ports, roads, petroleum exploration/processing, and mining.

India's external debt was nearly $230 billion by the end of 2008, up from $126 billion in 2005-2006. Foreign assistance was approximately $3 billion in 2006-2007, with the United States providing about $126 million in development assistance. The World Bank planned to double aid to India to almost $3 billion a year, focusing on infrastructure, education, health, and rural livelihoods.