India

K

Foreign Trade

The economic reforms introduced in 1991 radically altered India’s trade policies in order to encourage foreign trade. In 1990-1991, before the reforms were implemented, India recorded $27.9 billion in imports and $18.5 billion in exports. In 2003 India had $77.2 billion in imports and $63 billion in exports. Principal trading partners for India’s exports include the United States (by far India’s largest trading partner), the United Kingdom, China (primarily Hong Kong), Germany, and Japan. India receives the bulk of its imports from the United States, Singapore, Belgium, the United Kingdom, and Germany.

India’s principal exports are gems and jewelry, garments and textiles, engineering products, chemicals, and marine and agricultural products. Other important exports include ores and minerals, leather goods, carpets, electronic goods, and computer software. In the 1990s India emerged as a major supplier of computer software, as well as computer services such as software programming and data processing. The export of software services and electronics is growing rapidly, contributing 15 percent of the country’s total export earnings in 1999-2000. India’s major imports include petroleum and petroleum products, nonelectrical machinery, precious and semiprecious stones, electronic goods, chemicals, cooking oil, iron and steel, fertilizers, and plastics.

L

Currency and Banking

The rupee, India’s basic monetary unit, is divided into 100 paise (44.10 rupees equal U.S.$1; 2005 average). The Reserve Bank of India, founded in 1934 and nationalized in 1949, operates as India’s central banking institution. It is the sole authority for issuing bank notes and the supervisory body for all banking operations in India. It supervises and administers exchange-control and banking regulations, the government’s monetary policy, and licenses for private and foreign-owned banks. The central government’s Ministry of Finance and statutory bodies such as the Security and Exchange Board of India also help control the financial sector. Although government-owned banks dominate India’s banking industry, numerous private and foreign banks have been licensed to operate in the country since the 1991 economic reforms.

There are a number of stock exchanges in India. One of the largest is the Bombay Stock Exchange in Mumbai. Founded in 1875, the Bombay Stock Exchange is the oldest in Asia. Another major stock exchange is the National Stock Exchange, founded in 1994, also in Mumbai.

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VI

Government

The Republic of India is a federal republic, governed under a constitution and incorporating various features of the constitutional systems of the United Kingdom, the United States, and other democracies. The power of the government is separated into three branches: executive, parliament, and a judiciary headed by a Supreme Court. Like the United States, India is a union of states, but its federalism is slightly different. The central government has power over the states, including the power to redraw state boundaries, but the states, many of which have large populations sharing a common language, culture, and history, have an identity that is in some ways more significant than that of the country as a whole.

A

Constitution

India’s constitution went into effect in 1950, providing civil liberties protected by a set of fundamental rights. These include not only rights to free speech, assembly, association, and the exercise of religion—echoing the United States Bill of Rights—but also rights such as that of citizens to conserve their culture and language and to establish schools to aid this endeavor. The constitution also lists principles of national policy, such as the duty of the government to secure equal pay for men and women, provision of free legal aid, and protection and improvement of the environment. India has universal voting rights for adults beginning at age 18.

The Indian parliament has amended the constitution many times since 1950. Most of these amendments were minor, but others were of major significance: For example, the 7th amendment (1956) provided for a major reorganization of the boundaries of the states, and the 73rd and 74th amendments (1993) gave constitutional permanence to units of local self-government (village and city councils).

B

Executive

The head of state of India is the president. The role of president, modeled on the British constitutional monarch, is largely nominal and ceremonial. Most powers assigned to the president are exercised under direction of the cabinet. The president’s major political responsibility is to select the prime minister, although that choice is circumscribed by a constantly evolving set of conventions (for example, that the leader of the party with the largest number of seats in parliament should be given the first opportunity to form a government).

The president is elected for a five-year term by an electoral college consisting of the elected members of the national and state legislatures. The president is eligible for successive terms. The vice president is elected in the same manner as the president and assumes the role of the president if the president is incapacitated or otherwise unable to perform his or her duties.

A council of ministers, or cabinet, is headed by a prime minister and wields executive power at the national level. The council, which is responsible to parliament, is selected by the president upon the advice of the prime minister. Each council member heads an administrative department of the central government. In most important respects, the Indian cabinet system is identical to that of Britain. There is a constitutionally fixed division of responsibilities between national and state governments, so that the national government has exclusive powers over areas such as foreign affairs, while the states are responsible for health-care systems and agricultural development, among other areas. Some areas are the joint responsibility of both the national and state governments, such as education.

The actual administration is carried out by a many-tiered civil service, almost all of whom are recruited by a competitive, merit-based examination. At the top is the Indian Administrative Service (IAS), whose senior members serve as the administrative heads of departments, responsible only to their minister. All members of this service are assigned to particular states and spend most of their early career serving in those states. They typically start as district-level administrators and rapidly move to head state-level departments. Additional central government civil services include the Indian Foreign Service, the Indian Police Service, and services for audits and accounts, posts and telegraphs, customs and excise, and railroads.

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