India

A

Economic Policy

Economic policy after independence emphasized central planning, with the government setting goals for and closely regulating private industry. Self-sufficiency was promoted in order to foster domestic industry and reduce dependence on foreign trade. These efforts produced steady economic growth in the 1950s, but less positive results in the two succeeding decades.

In the late 1970s the government began to reduce state control of the economy but made slow progress toward this goal. By 1991 the government still regulated or ran many industries, including mining and quarrying, banking and insurance, transportation and communications, and manufacturing and construction. Economic growth improved during this period, at least partially as a result of development projects funded by foreign loans.

A financial crisis in 1991 compelled India to institute major economic reforms. After a rise in oil prices precipitated by the Persian Gulf War of 1990 to 1991, India faced a serious balance-of-payments problem. Because petroleum was a major import, India’s expenditures on imports far exceeded its income from exports. To obtain emergency loans from international economic organizations, India agreed to adopt reforms aimed at liberalizing its economy. These reforms removed many government regulations on investment, including foreign investment, and eliminated a quota and tariff system that had kept trade at a low level. The reforms also began a gradual process of deregulating industries and privatizing public enterprises. In 1999 the government made privatization of the public sector the centerpiece of its agenda, permitting private investment in all infrastructure industries, including power, telecommunications, and civil aviation, as well as in the financial sector. Some industries remain reserved for the public sector, including defense equipment, railways, and nuclear energy.

With the reforms, India made a dramatic shift from an economy relatively closed to the global economy to one that is relatively open. Growth of exports has helped India to increase its share of world trade, while the inflow of foreign capital has helped India reduce its external debt. Economic growth has brought an expansion of the middle class, leading to growing demand for consumer goods from shoes to luxury cars. Despite the emergence of a consumer-oriented middle class, however, income inequalities and widespread poverty remain significant issues.

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B

Labor

The Indian economy employs 435 million people. The majority of this workforce—67 percent—labors in the agricultural sector. Of the remainder, 20 percent work in services and 13 percent in industry. Women make up 28 percent of the total labor force.

Significant numbers of children are employed in India. They not only perform agricultural tasks such as herding and helping at harvest time, but they also work in cottage industries such as carpet weaving and match manufacturing, help in small businesses such as tea stalls, and act as servants in private homes. Estimates of the number of working children vary widely, due in part to a lack of formal government data on child labor. Child labor is illegal in India, and efforts have been made to abolish it, particularly in the most hazardous industries.

Unemployment rates in India are difficult to estimate because many people work in temporary or part-time jobs. Few workers are permanently unemployed, but seasonally or marginally employed people such as agricultural laborers are often underemployed. State and national governments have established fairly successful rural employment plans that hire labor to build roads and other public works.

Labor unions are relatively small in India and operate primarily in public-sector enterprises. India’s labor laws allow multiple union representation not only within an industry but even within a factory. Laws also tend to favor workers’ rights over employer prerogatives. As a result there is an increasing trend in business to hire workers on daily contracts. Older unions are linked to national trade union federations controlled by political parties. Since the 1980s, however, there has been an increase in independent unions unrelated to political parties. Some successful small-industry entrepreneurs have organized cooperatives. A notable one is the Self-Employed Women’s Association (SEWA), which has expanded from its base in Ahmadābād to other Indian cities, as well as other countries.

C

Agriculture

Agriculture employs (with forestry and fishing) about two-thirds of India’s workforce. Most farms are small, averaging about 1.5 hectares (about 3.7 acres). About 40 percent of the land in India is cultivated by farmers owning more than 4 hectares (10 acres), but few farms are larger than 20 hectares (50 acres) due to land reforms that imposed ceilings (maximum limits) on holdings. Most Indian farmers, particularly those who own smaller farms, cultivate their land by hand or by using oxen.

India’s most important crops include cotton, tea, rice, wheat, and sugarcane. Other important cash crops include jute, groundnuts, coffee, oil seeds, and spices. Another central feature of India’s agricultural economy is the raising of livestock, particularly horned cattle, buffalo, and goats. In 2005 the country had 185 million cattle, substantially more than almost any other country. The cattle are used mainly as draft animals and for leather. As farmers increasingly use machinery, the number of livestock they raise will probably decrease. Buffalo is the main animal used for producing milk and dairy products. Milk production and distribution increased dramatically in the 1990s because of a nationwide, government-supported cooperative dairy program. Sheep are raised for wool, and goats are the main meat animal. Many Indians, particularly Hindus, refuse to eat beef for religious reasons, although they eat other meat, eggs, and fish.

Agricultural production faces occasional declines as a result of irregular monsoon seasons, resulting in widespread flooding or drought. Food imports help offset yearly fluctuations in output. India faces many future challenges in producing enough food to feed its growing population. Production of food grain has barely kept pace with the rate of population increase. The government-implemented Green Revolution, which took hold in the 1970s, encouraged the use of high-yielding crop varieties, fertilizers, and carefully managed irrigation. It resulted in a steady growth in production of food grain, allowing India to achieve self-sufficiency by 1984. However, success has been limited to areas of assured irrigation, such as northwestern India and the deltaic regions. Output has not significantly improved in dry and semiarid areas, where poverty and malnourishment remain prevalent.

D

Forestry and Fishing

Although relatively undeveloped on a national scale, large-scale commercial fishing is vital to the economy in certain regions, such as the Ganges Delta in West Bengal and along the southwestern coast. Small-scale fishing is widespread, taking place in oceans, lagoons, rivers, ponds, wells, and even flooded paddy fields; these fish are typically sold in street markets. In recent years the government has encouraged deep-sea fishing by building processing plants and giving aid to oceangoing fleets and vessels. Local, more traditional fishers protest this encouragement because they see it as a threat to their livelihood. In 2004 the government recorded an annual fish catch of 6.1 million metric tons, about half of which was marine species.

Forests cover 23 percent of India’s total land area. The area of land planted in trees has increased steadily since 1990 due to government and commercial plantation schemes. However, the harvesting of mature trees for lumber production has tended to outpace the growth rate of replanted areas. Loss of topsoil in harvested areas as well as forestland lost to development and agriculture have also contributed to India’s difficulty in achieving sustainable timber harvests. Industrial timber species include teak, deodar (a type of cedar), and sal. Products such as charcoal, fruits and nuts, fibers, oils, gums, and resins are among the most valuable commodities from India’s forests.

E

Mining

India ranks among the world leaders in the production of coal, iron ore, and bauxite. Cut diamonds are also an important export product. India also produces significant amounts of manganese, mica, dolomite, copper, petroleum, natural gas, chromite, lignite, limestone, gold, and zinc.

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