Information technology Industry of India

Information technology, and the hardware and software associated with the IT industry, are an integral part of nearly every major global industry.

• Unlike other common industries, the IT industry is knowledge-based.
• Efficient utilization of skilled labor forces in the IT sector can help an economy achieve a rapid pace of economic growth.
• The IT industry helps many other sectors in the growth process of the economy including the services and manufacturing sectors.

The role of the IT Industry

The IT industry can serve as a medium of e-governance, as it assures easy accessibility to information. The use of information technology in the service sector improves operational efficiency and adds to transparency. It also serves as a medium of skill formation.
The information technology (IT) industry has become of the most robust industries in the world. IT, more than any other industry or economic facet, has an increased productivity, particularly in the developed world, and therefore is a key driver of global economic growth. Economies of scale and insatiable demand from both consumers and enterprises characterize this rapidly growing sector.

The Information Technology Association of America (ITAA) explains the “information technology” as encompassing all possible aspects of information systems based on computers.

Both software development and the hardware involved in the IT industry include everything from computer systems, to the design, implementation, study and development of IT and management systems.

Owing to its easy accessibility and the wide range of IT products available, the demand for IT services has increased substantially over the years. The IT sector has emerged as a major global source of both growth and employment.

Features of the IT Industry at a Glance

• Economies of scale for the information technology industry are high. The marginal cost of each unit of additional software or hardware is insignificant compared to the value addition that results from it.

MAJOR STEPS TAKEN FOR PROMTION OF IT INDUSTRY

Domain of the IT Industry

A wide variety of services come under the domain of the information technology industry. Some of these services are as follows:

• Systems architecture
• Database design and development
• Networking
• Application development
• Testing
• Documentation
• Maintenance and hosting
• Operational support
• Security services

Software Industry of India

Adoption of new liberal policies in India has given birth immense opportunities to its industries. Success story of India's Software Industry is a step in the same direction.
India's Software Exports:

Software exports has major share in India's total exports. As of the year 2004-05, both software and services revenue grew by 32 percent to $ 22 billions and $ 28.5 billions in 2005-06.

According to NASSCOM, India's domestic market, grew by 24 per cent. Presently Indian companies have concentrated on only two largest IT service markets. They are USA and the UK. Even Canada, Japan, Germany and France represent huge growth potential in the industry.
The Software Industry, which is a main component of the Information technology, has brought tremendous success for the emerging economy.

India's young aged manpower is the key behind this success story. Presently there are more than 500 software firms in the country.

Progress of IT Industry
(In terms of US $ billion)

Year	2003-04	2004-05	2005-06*
IT software and service exports	9.2	12.0	15.2
ITE-BPO exports	3.6	5.2	7.3
Domestic market	3.9	4.8	6.0
Total	16.7	22.0	28.5

*Estimated
Source: Ministry of Communications and IT.
Overview on India's Software Industry

According to statistics, country's software exports reached total revenues of Rs 46100 crores. The share of total Indian exports form 4.9 per cent in 1997 to 20.4 percent in 2002-03. It is expected that the industry will generate a total employment of around four millions peoples, which accounts for 7 per cent of India's total GDP as in the year 2008.

The year 1995-96 was a boom for the industry. The performance of the industry over the years is as follows:

(In terms of US $ millions)

	1995-96	1996-97	1997-98	1998-99	1999-2000	2000-01*
Domestic software Market	490	670	920	1250	1700	2450
Software Exports	734	1085	1750	2650	4000	6300
Indian Software Industry	1224	1755	2670	3900	5700	8750

(* Source: NASSCOM)

Conclusion:

The credit goes to technical young peoples and English-speaking scientific professionals for the success in India's software industry. Presently for further strengthening the industry, the Government has stepped forward with more qualitative institutes.

Indian Retail Industry

The retail industry in India gathered a new dimension with the setting up of the different International Brand Outlets, Hyper or Super markets, shopping malls and departmental stores.

Key Players in the Indian Retail Sector:

The untapped scope of retailing has attracted superstores like Wal-Mart into India, leaving behind the kiranas that served us for years. Such companies are basically IT based. The other important participants in the Indian Retail sector are Bata, Big Bazaar, Pantaloons, Archies, Cafe Coffee Day, landmark, Khadims, Crossword, to name a few.

Retailing in India: a forecast:

Evolution of Indian retail Industry:


Indian Retail Industry is standing at its point of inflexion, waiting for the boom to take place. The inception of the retail industry dates back to times where retail stores were found in the village fairs , Melas or in the weekly markets. These stores were highly unorganized. The maturity of the retail sector took place with the establishment of retail stores in the locality for convenience. With the government intervention the retail industry in India took a new shape. Outlets for Public Distribution System, Cooperative stores and Khadi stores were set up. These retail Stores demanded low investments for its establishment.
Future of organized retail in India looks bright. According to recent researches it is projected to grow at a rate of about 37% in 2007 and at a rate of 42% in 2008. It will capture a share of 10% of the total retailing by the end of 2010.

According to the Union Minister of Commerce & Industry, Shri Kamal Nath, the organized retail sector is expected to grow to a value of Rs. 2,00,000 crore (US$45 billion) and may generate 10 to15 million jobs in next 5 years. This can happen in two forms- 2.5 million of these people may be associated directly with retailing and the rest 10 million people may be gainfully employed in related sectors that will be pulled up through the strong forward and backward linkage effects.

However to compete in this sector one needs to have up-to-date market information for planing and decision making. The second most important requirement is to manage costs widely in order to earn at least normal profits in face of stiff competition.

Recent Growth Trends in Indian Economy

India’s Economy has grown by more than 9% for three years running, and has seen a decade of 7%+ growth. This has reduced poverty by 10%, but with 60% of India’s 1.1 billion population living off agriculture and with droughts and floods increasing, poverty alleviation is still a major challenge.

The structural transformation that has been adopted by the national government in recent times has reduced growth constraints and contributed greatly to the overall growth and prosperity of the country. However there are still major issues around federal vs state bureaucracy, corruption and tariffs that require addressing. India’s public debt is 58% of GDP according to the CIA World Fact book, and this represents another challenge.

During this period of stable growth, the performance of the Indian service sector has been particularly significant. The growth rate of the service sector was 11.18% in 2007 and now contributes 53% of GDP. The industrial sector grew 10.63% in the same period and is now 29% of GDP. Agriculture is 17% of the Indian economy.

Growth in the manufacturing sector has also complemented the country’s excellent growth momentum. The growth rate of the manufacturing sector rose steadily from 8.98% in 2005, to 12% in 2006. The storage and communication sector also registered a significant growth rate of 16.64% in the same year.

Additional factors that have contributed to this robust environment are sustained in investment and high savings rates. As far as the percentage of gross capital formation in GDP is concerned, there has been a significant rise from 22.8% in the fiscal year 2001, to 35.9% in the fiscal year 2006. Further, the gross rate of savings as a proportion to GDP registered solid growth from 23.5% to 34.8% for the same period.

Indian Economy Overview

India has been one of the best performers in the world economy in recent years, but rapidly rising inflation and the complexities of running the world’s biggest democracy are proving challenging.

India’s economy has been one of the stars of global economics in recent years, growing 9.2% in 2007 and 9.6% in 2006. Growth had been supported by markets reforms, huge inflows of FDI, rising foreign exchange reserves, both an IT and real estate boom, and a flourishing capital market.
Like most of the world, however, India is facing testing economic times in 2008. The Reserve Bank of India had set an inflation target of 4%, but by the middle of the year it was running at 11%, the highest level seen for a decade. The rising costs of oil, food and the resources needed for India’s construction boom are all playing a part.

India has to compete ever harder in the energy market place in particular and has not been as adept at securing new fossil fuel sources as the Chinese. The Indian Government is looking at alternatives, and has signed a wide-ranging nuclear treaty with the US, in part to gain access to nuclear power plant technology that can reduce its oil thirst. This has proved contentious though, leading to leftist members of the ruling coalition pulling out of the government.

As part of the fight against inflation a tighter monetary policy is expected, but this will help slow the growth of the Indian economy still further, as domestic demand will be dampened. External demand is also slowing, further adding to the downside risks.
The Indian stock market has fallen more than 40% in six months from its January 2008 high. $6b of foreign funds have flowed out of the country in that period, reacting both to slowing economic growth and perceptions that the market was over-valued.

It is not all doom and gloom, however. A growing number of investors feel that the market may now be undervalued and are seeing this as a buying opportunity. If their optimism about the long term health of the Indian economy is correct, then this will be a needed correction rather than a downtrend.

The Indian government certainly hopes that is the case. It views investment in the creaking infrastructure of the country as being a key requirement, and has ear-marked 23.8 trillion rupees, approximately $559 billion, for infrastructure upgrades during the 11th five year plan. It expects to fund 70% of project costs, with the other 30% being supplied by the private sector. Ports, airports, roads and railways are all seen as vital for the Indian Economy and have been targeted for investment.
Further hope comes from the confidence of India’s home bred companies. As well as taking over the domestic reins, where they now account for most of the economic activity, they are also increasingly expanding abroad. India has contributed more new members to the Forbes Global 2000 than any other country in the last four years.

Fact Files of Banks in India

The first, the oldest, the largest, the biggest, get all such types of informations about Banking in India in this section.

The first bank in India to be given an ISO Certification	Canara Bank
The first bank in Northern India to get ISO 9002 certification for their selected branches	Punjab and Sind Bank
The first Indian bank to have been started solely with Indian capital	Punjab National Bank
The first among the private sector banks in Kerala to become a scheduled bank in 1946 under the RBI Act	South Indian Bank
India's oldest, largest and most successful commercial bank, offering the widest possible range of domestic, international and NRI products and services, through its vast network in India and overseas	State Bank of India
India's second largest private sector bank and is now the largest scheduled commercial bank in India	The Federal Bank Limited
Bank which started as private shareholders banks, mostly Europeans shareholders	Imperial Bank of India
The first Indian bank to open a branch outside India in London in 1946 and the first to open a branch in continental Europe at Paris in 1974	Bank of India, founded in 1906 in Mumbai
The oldest Public Sector Bank in India having branches all over India and serving the customers for the last 132 years	Allahabad Bank
The first Indian commercial bank which was wholly owned and managed by Indians	Central Bank of India

Bank of India was founded in 1906 in Mumbai. It became the first Indian bank to open a branch outside India in London in 1946 and the first to open a branch in continental Europe at Paris in 1974.

Indian Banks Association (IBA)

The Indian Banks Association (IBA) was formed on the 26th September, 1946 with 22 members. Today IBA has more than 156 members comprising of Public Sector banks, Private Sector banks, Foreign banks having offices in India, Urban Co-operative banks, Developmental financial institutions, Federations, merchant banks, mutual funds, housing finance corporations, etc.

The functioning of IBA

• To promote sound and progressive banking principles and practices.
  
  
• To render assistance and to provide common services to members.
  
  
• To organise co-ordination and co-operation on procedural, legal, technical, administrative and professional matters.
  
  
• To collect, classify and circulate statistical and other information.
  
  
• To pool together expertise towards common purposes such as reduction in costs, increase in efficiency, productivity and improve systems, procedures and banking practices.
  
  
• To project good public image of banking through publicity and public relations.
  
  
• To encourage sports and cultural activities among bank employees.

The Offices of IBA

Stadium House,
Block II & III, 6th Floor,
Veer Nariman Road, Mumbai 400 020.
Tel.:91-22- 22894500, Fax:91-22-22835638

World Trade Centre Complex,
Centre I, Units 1,2 & 4,
6th Floor, Cuffe Parade,
Mumbai-400 005.
Tel.:91-22- 22174040, Telex: 011 85146, Fax:91-22-22184222.
Email: ibalink@bom3.vsnl.net.in

The Organisational Structure of IBA

The Managing Committee manages the affairs, business and funds of IBA. The managing Committee is elected by the Ordinary members of the Association, and is the highest management and policy making body of the Association.

The Chairman of the Association heads upon the working of the Association. He provides guidelines to the Association. The administrative head of IBA is the Chief Executive of IBA. He is also the Secretary to the Managing Committee. He leads a team of executives, officers and other staff members.

The contact details of IBA

At World Trade Centre Complex	Direct Nos.
Legal	91-22-22187946 91-22-22174006
Banking Policy	91-22-22182217 91-22-22174014
Payment Systems	91-22-22182196 91-22-22174013
Banking Operations	91-22-22182247 91-22-22174015
Publicity	91-22-22180821 91-22-22174012
Technology	91-22-22182196 91-22-22174011
Library	91-22-22182288 91-22-22174009
At Stadium House :
Personnel (HR & IR)	91-22-22028525 91-22-22894502 91-22-22831636 91-22-22894501
Administration & Accounts :	91-22-22824846 91-22-22894518

IBA constitutes standing committees/task forces/ small groups/ committees of experts from member banks for the examining of various aspects relating to industry level issues to get solutions.

Recommendations of these groups/committees, are communicated to members with the approval of the managing committee or taken up with the concerned authorities for action.

Easy Banking

This section is fully dedicated to the Tech Banking. A decade before, it was tough to belief that banking secctor will be at a finger tip. Now its possible. A mobile hand set with a connection is the only instrument needed to make a gateway to your banking transaction, the latest innovation of technology.

Apart from the Mobile Banking, including of SMS Banking, Net Banking and ATMs are the major steps taken by the banks in India towards modernisation. With all these devises and systems, there is a complete freedom to experience.

Check your account, transfer your fund, make payments and what more, do anything of everything what has been followed in physical banking since ages. But this time no standing for hours in front of cash counter and no time boundation in withdrawing your own money.

Banking Services for NRIs in India

Almost all the Indian Banks provide services to the NRIs. There are different types of accounts for them. They are:

• Non-Resident (Ordinary) Account - NRO A/c
• Non-Resident (External) Rupee Account - NRE A/c
• Non-Resident (Foreign Currency) Account - FCNR A/c

An Indian resident who is earning forign exchange can also maintain Foreign Currency account in the country with an authorised dealer bank but only to the maximum limit of 50% of such foreign exchange earnings under the Exchange Earners Foreign Currency Account (EEFC) Scheme.

Some of the FAQs given below will make it easy to understand the services provided by banks to the NRIs.

1. What are the special features of each bank account?
   
   The special features are as under:
   
   NRO A/c.: The funds, credited to this account, cannot be repatriated outside India in foreign exchange, without prior permission of the Reserve Bank of India. Interest, earned is eligible for repatriation outside India, net of Indian taxes. The remittance of interest (net of taxes) will be permitted by the authorised dealer who maintains the account, if the account holder makes an application to the authorised dealer, in the prescribed form. No RBI permission is required for remittance of interest.
   
   NRE A/c.: The funds, standing to the credit of this account, as well as interest earned thereon, are remittable outside India in free foreign exchange, without permission of the RBI. The interest income is not subject to Indian Income-tax. Credits to the accounts should be in the form of remittance in foreign exchange from outside India, as well as other funds, which are eligible to be remitted outside India, in free foreign exchange. Funds, emanating from local sources, are not eligible to be credited to these accounts, unless these funds are otherwise remittable outside India, in terms of the existing Exchange Control Regulations.
   
   FCNR A/c.: These accounts can be opened in four foreign currencies:
   • Pounds Sterling;
   • US Dollars;
   • Japanese Yen;
   • Euro.
     
     
   For the purpose of opening an account, remittance in foreign exchange, in the same currency, should be received in India. The accounts can be opened only as fixed deposits, with a minimum maturity of one year and, a maximum maturity of three years. The principal, as well as interest, earned on these accounts, is remittable outside India, in the same currency or, in other convertible currency, as desired by the account holder. The interest, earned on these deposits, is exempt from Indian Income-tax.
   
   
2. Can Non Resident accounts be opened/ operated by the Power of Attorney holder in India, on behalf of the non-resident?
   
   The accounts cannot be opened by the Power of Attorney holder in India. However, the latter can operate the accounts for the purpose of local payments to be made on behalf of the non-resident account holder. The Power of Attorney holder is not permitted to make gifts from these accounts and, is not allowed to make remittances outside India.
   
   
3. What happens to the status of these accounts when the non-resident holder becomes a person, resident in India?
   
   The accounts are to be re-designed as resident accounts, when the non-resident account holder becomes a person, resident in India. In the case of fixed deposits opened by the account holder, before becoming resident in India, the contracted rate of interest will be paid till maturity of the deposits. Similarly, FCNR deposits will be eligible to be held in respective currencies till maturity of the deposits, even after the non-resident holder become a resident in India. He will, however, cease to get tax exemption on interest on the erstwhile deposits (NRE/FCNR deposits), after he becomes resident in India. In certain situations, it might be advisable for the account holder to convert the account to a Resident Foreign Currency Account Deposit (RFC)
   
   
4. What are the various facilities available to NRIs/OCBs?
   
   The facilities available to NRIs/OCBs for making investment in India are as follows:
   • opening and maintenance of bank accounts in India;
     
     
   • investment in shares and securities of Indian companies, government securities, units of domestic mutual funds and ,deposits with Indian companies/firms;
     
     
   • investment in immovable properties in India;
     
     
   • investment in proprietorship/partnership concerns in India.
   
   
   
5. Are NRIs permitted to send remittances outside India out of the assets in India that are inherited by them?
   
   Yes. RBI will consider application from NRIs for remittance of assets, inherited by them in India. Such remittance may be permitted up to US$ 100,000 per year.
   
   
6. Can a person of Indian origin acquire any immovable property in India by way of inheritance?
   
   A person of Indian origin, resident outside India, may acquire any immovable property in India by way of inheritance from a person, resident outside India, who had acquired such property in accordance with the provisions of foreign exchange law in force at the time of acquisition by him or the provisions of Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2000. Immovable property, by way of inheritance, can also be acquired by a person of Indian origin resident outside from a person resident in India.
   
   
7. Can NRIs and Overseas Corporate Bodies (OCBs) invest in India?
   
   The Government of India has adopted a liberal policy, with respect to investments by NRIs and OCBs in India. Such investments are allowed, both, through the RBI route and also through the Government route, i.e., through the Foreign Investment Promotion Board (FIPB) NRIs and OCBs are permitted to invest up to 100% equity in real estate development activity and civil aviation sectors. Investment, made by the NRIs and OCBs, are fully repatriable, except in the case of real estate, which has a 3 year lock-in period on original investment and, 16% cap on dividend repatriation. For those proposals that do not qualify under the automatic route, Government approval is granted through FIPB.
   
   
8. What is the extent and application of Foreign Exchange Management Act (FEMA)?
   
   FEMA extends to the whole of India. It also applies to all branches, offices and agencies outside India, owned or controlled by a person, resident in India. It also applies to any contravention, there under, committed in or, outside India, by any person to whom the Act applies.
   
   
9. What is the penalty for contravention of FEMA?
   
   Any person, contravening FEMA, shall be liable, upon adjudication, to a penalty up to three times the sum involved in such contravention, where such amount is quantifiable, or up to Rupees Two hundred thousand, where the amount is not quantifiable. In addition, where such contravention is a continuing one, the person will be liable to further penalty, which may extend to Rupees Five thousand for every day after the first day, during which the contravention continues.
   
   
10. Can a person of Indian origin resident outside India gift properties acquired earlier in terms of the provisions of FERA/FEMA?
    
    Yes. A person of Indian origin resident outside India may transfer residential or commercial property in India by way of gift to a person resident in India or to a person resident outside India who is a citizen of India or to a person of Indian origin resident outside India. A Person of Indian origin resident outside India may also transfer by way of gift agriculture land/farm house/plantation property in India to a person resident in India who is a citizen of India.
    
    
11. Can an NRI account be opened in the name of crew members of shipping companies?
    
    Yes, if their posting is not based in India and they derive their income from other country in foreign currency.

Reserve Bank of India (RBI)

Kindly Take Note : Reserve Bank of India (RBI) is the central bank of the country and is different from Central Bank of India.

The central bank of the country is the Reserve Bank of India (RBI). It was established in April 1935 with a share capital of Rs. 5 crores on the basis of the recommendations of the Hilton Young Commission. The share capital was divided into shares of Rs. 100 each fully paid which was entirely owned by private shareholders in the begining. The Government held shares of nominal value of Rs. 2,20,000.

Reserve Bank of India was nationalised in the year 1949. The general superintendence and direction of the Bank is entrusted to Central Board of Directors of 20 members, the Governor and four Deputy Governors, one Government official from the Ministry of Finance, ten nominated Directors by the Government to give representation to important elements in the economic life of the country, and four nominated Directors by the Central Government to represent the four local Boards with the headquarters at Mumbai, Kolkata, Chennai and New Delhi. Local Boards consist of five members each Central Government appointed for a term of four years to represent territorial and economic interests and the interests of co-operative and indigenous banks.

The Reserve Bank of India Act, 1934 was commenced on April 1, 1935. The Act, 1934 (II of 1934) provides the statutory basis of the functioning of the Bank.

The Bank was constituted for the need of following:

• To regulate the issue of banknotes
• To maintain reserves with a view to securing monetary stability and
• To operate the credit and currency system of the country to its advantage.

Financial and Banking Sector Reforms

The last decade witnessed the maturity of India's financial markets. Since 1991, every governments of India took major steps in reforming the financial sector of the country. The important achievements in the following fields is discussed under serparate heads:

• Financial markets
• Regulators
• The banking system
• Non-banking finance companies
• The capital market
• Mutual funds
• Overall approach to reforms
• Deregulation of banking system
• Capital market developments
• Consolidation imperative

Now let us discuss each segment seperately.

Banking services in India

With years, banks are also adding services to their customers. The Indian banking industry is passing through a phase of customers market. The customers have more choices in choosing their banks. A competition has been established within the banks operating in India.

With stiff competition and advancement of technology, the services provided by banks has become more easy and convenient. The past days are witness to an hour wait before withdrawing cash from accounts or a cheque from north of the country being cleared in one month in the south.

This section of banking deals with the latest discovery in the banking instruments along with the polished version of their old systems.

Banks in India

In India the banks are being segregated in different groups. Each group has their own benefits and limitations in operating in India. Each has their own dedicated target market. Few of them only work in rural sector while others in both rural as well as urban. Many even are only catering in cities. Some are of Indian origin and some are foreign players.

All these details and many more is discussed over here. The banks and its relation with the customers, their mode of operation, the names of banks under different groups and other such useful informations are talked about.

One more section has been taken note of is the upcoming foreign banks in India. The RBI has shown certain interest to involve more of foreign banks than the existing one recently. This step has paved a way for few more foreign banks to start business in India.

Banking In India

Introduction

The banking section will navigate through all the aspects of the Banking System in India. It will discuss upon the matters with the birth of the banking concept in the country to new players adding their names in the industry in coming few years.

The banker of all banks, Reserve Bank of India (RBI), the Indian Banks Association (IBA) and top 20 banks like IDBI, HSBC, ICICI, ABN AMRO, etc. has been well defined under three separate heads with one page dedicated to each bank.

However, in the introduction part of the entire banking cosmos, the past has been well explained under three different heads namely:

• History of Banking in India
• Nationalisation of Banks in India
• Scheduled Commercial Banks in India

The first deals with the history part since the dawn of banking system in India. Government took major step in the 1969 to put the banking sector into systems and it nationalised 14 private banks in the mentioned year. This has been elaborated in Nationalisationof Banks in India. The last but not the least explains about the scheduled and unscheduled banks in India. Section 42 (6) (a) of RBI Act 1934 lays down the condition of scheduled commercial banks. The description along with a list of scheduled commercial banks are given on this page.

Physical infrastructure

Radio Taxis que outside Rajiv Gandhi International Airport, one of India's several newly constructed modern airports.

The Mumbai-Pune Expressway is one of the largest infrastructure projects taken up by the Indian government

Development of infrastructure was completely in the hands of the public sector and was plagued by corruption, bureaucratic inefficiencies, urban-bias and an inability to scale investment.

India's low spending on power, construction, transportation, telecommunications and real estate, at $31 billion or 6% of GDP in 2002 had prevented India from sustaining higher growth rates. This had prompted the government to partially open up infrastructure to the private sector allowing foreign investment which has helped in a sustained growth rate of close to 9% for the past six quarters. India holds second position in the world in roadways' construction, more than twice that of China. As of 2005 the electricity production was at 661.6 billion kWh with oil production standing at 785,000 bbl/day. India's prime import partners are: China 8.7%, US 6%, Germany 4.6%, Singapore 4.6%, Australia 4% as of 2006 CIA FactBook As of 15 January 2007, there were 2.10 million broadband lines in India. Low tele-density is the major hurdle for slow pickup in broadband services. Over 76% of the broadband lines were via DSL and the rest via cable modems.

Financial institutions

India inherited several institutions, such as the civil services, Reserve Bank of India, railways, etc., from its British rulers. Mumbai serves as the nation's commercial capital, with the Reserve Bank of India (RBI), Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) located here. The headquarters of many financial institutions are also located in the city.

A business park in Gurgaon, India.

The RBI, the country's central bank was established on 1 April 1935. It serves as the nation's monetary authority, regulator and supervisor of the financial system, manager of exchange control and as an issuer of currency. The RBI is governed by a central board, headed by a governor who is appointed by the Central government of India. The BSE Sensex or the BSE Sensitive Index is a value-weighted index composed of 30 companies with April 1979 as the base year (100). These companies have the largest and most actively traded stocks and are representative of various sectors, on the Exchange. They account for around one-fifth of the market capitalisation of the BSE. The Sensex is generally regarded as the most popular and precise barometer of the Indian stock markets. Incorporated in 1992, the National Stock Exchange is one of the largest and most advanced stock markets in India. The NSE is the world's third largest stock exchange in terms of transactions. There are a total of 23 stock exchanges in India, but the BSE and NSE comprise 83% of the volumes. The Securities and Exchange Board of India (SEBI), established in 1992, regulates the stock markets and other securities markets of the country.

Natural resources

India's total cultivable area is 1,269,219 km² (56.78% of total land area), which is decreasing due to constant pressure from an ever growing population and increased urbanisation.

India has a total water surface area of 314,400 km² and receives an average annual rainfall of 1,100 mm. Irrigation accounts for 92% of the water utilisation, and comprised 380 km² in 1974, and is expected to rise to 1,050 km² by 2025, with the balance accounted for by industrial and domestic consumers. India's inland water resources comprising rivers, canals, ponds and lakes and marine resources comprising the east and west coasts of the Indian ocean and other gulfs and bays provide employment to nearly 6 million people in the fisheries sector. In 2008, India had the world's third largest fishing industry.

India's major mineral resources include Coal (fourth-largest reserves in the world), Iron ore, Manganese, Mica, Bauxite, Titanium ore, Chromite, Natural gas, Diamonds, Petroleum, Limestone and Thorium (world's largest along Kerala's shores). India's oil reserves, found in Bombay High off the coast of Maharashtra, Gujarat, and in eastern Assam meet 25% of the country's demand.

Rising energy demand concomitant with economic growth has created a perpetual state of energy crunch in India. India is poor in oil resources and is currently heavily dependent on coal and foreign oil imports for its energy needs. Though India is rich in Thorium, but not in Uranium, which it might get access to if a nuclear deal with US comes to fruition. India is rich in certain energy resources which promise significant future potential - clean / renewable energy resources like solar, wind, biofuels (jatropha, sugarcane).

Government intervention

State planning and the mixed economy

Asia's oldest stock exchange, the Bombay Stock Exchange, is also Asia's fourth largest stock exchange in terms of market capitalization. The National Stock Exchange of India is Asia's fifth largest. The government of India regulates stock exchanges across the country through Securities Contracts Act.

After independence, India opted for a centrally planned economy to try to achieve an effective and equitable allocation of national resources and balanced economic development. The process of formulation and direction of the Five-Year Plans is carried out by the Planning Commission, headed by the Prime Minister of India as its chairperson.

India's mixed economy combines features of both capitalist market economy and the socialist planned economy, but has shifted more towards the former over the past decade. The public sector generally covers areas which are deemed too important or not profitable enough to leave to the market, including such services as the railways and postal system. Since independence, there have been phases of nationalizing such areas as banking. More recently, there have been phases of privatizing such sectors.

Public expenditure

The number of people employed in non-agricultural occupations in the public and private sectors. Totals are rounded. Private sector data relates to non-agriculture establishments with 10 or more employees.

India's public expenditure is classified as development expenditure, comprising central plan expenditure and central assistance and non-development expenditures; these categories can each be divided into capital expenditure and revenue expenditure. Central plan expenditure is allocated to development schemes outlined in the plans of the central government and public sector undertakings; central assistance refers to financial assistance and developmental loans given for plans of the state governments and union territories. Non-development capital expenditure comprises capital defense expenditure, loans to public enterprises, states and union territories and foreign governments, while non-development revenue expenditure comprises revenue defence expenditure, administrative expenditure, subsidies, debt relief to farmers, postal deficit, pensions, social and economic services (education, health, agriculture, science and technology), grants to states and union territories and foreign governments.

India's non-development revenue expenditure has increased nearly fivefold in 2003–04 since 1990–91 and more than tenfold since 1985–1986. Interest payments are the single largest item of expenditure and accounted for more than 40% of the total non development expenditure in the 2003–04 budget. Defence expenditure increased fourfold during the same period and has been increasing due to India's desire to project its military prowess beyond South Asia. In 2007, India's defence spending stood at US$26.5 billion. Administrative expenses are compounded by a large salary and pension bill, which rises periodically due to revisions in wages, dearness allowance etc. subsidies on food, fertilizers, education and petroleum and other merit and non-merit subsidies account are not only continuously rising, especially because of rising crude oil and food prices, but are also harder to rein in, because of political compulsions.

Public receipts

Regional office of the State Bank of India (SBI), India's largest bank, in Mumbai. The government of India is the largest shareholder in SBI.

India has a three-tier tax structure, wherein the constitution empowers the union government to levy income tax, tax on capital transactions (wealth tax, inheritance tax), sales tax, service tax, customs and excise duties and the state governments to levy sales tax on intrastate sale of goods, tax on entertainment and professions, excise duties on manufacture of alcohol, stamp duties on transfer of property and collect land revenue (levy on land owned). The local governments are empowered by the state government to levy property tax and charge users for public utilities like water supply, sewage etc.^[39][40] More than half of the revenues of the union and state governments come from taxes, of which half come from Indirect taxes. More than a quarter of the union government's tax revenues is shared with the state governments.

The tax reforms, initiated in 1991, have sought to rationalise the tax structure and increase compliance by taking steps in the following directions:

• Reducing the rates of individual and corporate income taxes, excises, customs and making it more progressive
• Reducing exemptions and concessions
• Simplification of laws and procedures
• Introduction of permanent account number (PAN) to track monetary transactions
• 21 of the 29 states introduced value added tax (VAT) on April 1, 2005 to replace the complex and multiple sales tax system^[40][42]

The non-tax revenues of the central government come from fiscal services, interest receipts, public sector dividends, etc., while the non-tax revenues of the States are grants from the central government, interest receipts, dividends and income from general, economic and social services.

Inter-State share in the federal tax pool is decided by the recommendations of the Finance Commission to the President.

Total tax receipts of Centre & State amount to approximately 18% of national GDP. This compares to a figure of 37-45% in the OECD and explains why the country remains under-developed as evident inter-alia from the poor state of its infrastructure and social services compared to OECD countries. The limited resources of Government affect its ability to pay fair wages to public servants. This may well be the cause of of endemic corruption at all levels of government.

General budget

The Finance minister of India presents the annual union budget in the Parliament on the last working day of February. The budget has to be passed by the Lok Sabha before it can come into effect on April 1, the start of India's fiscal year. The Union budget is preceded by an economic survey which outlines the broad direction of the budget and the economic performance of the country for the outgoing financial year. This economic survey involves all the various NGOs, women organizations, business people, old people associations etc.

India's union budget for 2005–06, had an estimated outlay of Rs.5,14,344 crores ($118 billion). Earnings from taxes amount to Rs. 2,73,466 crore ($63b). India's fiscal deficit amounts to 4.5% or 1,39,231 crore ($32b). The fiscal deficit is expected to be 3.8% of GDP, by March 2007

History

India's economic history can be broadly divided into three eras, beginning with the pre-colonial period lasting up to the 17th century. The advent of British colonisation started the colonial period in the 17th century, which ended with independence in 1947. The third period stretches from independence in 1947 until now.

Pre-colonial

The citizens of the Indus Valley civilisation (based around the river Indus in modern day Pakistan and Northern and Western India), a permanent and predominantly urban settlement that flourished between 2800 BC and 1800 BC, 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 world's first urban sanitation systems and the existence of a form of municipal government.

Silver coin minted during the reign of the Gupta king Kumara Gupta I (AD 414–55)

The 1872 census revealed that 99.3% of the population of the region constituting present-day India resided in villages, whose economies were largely isolated and self-sustaining, with agriculture the predominant occupation. This satisfied the food requirements of the village and provided raw materials for hand-based industries, such as textiles, food processing and crafts. Although many kingdoms and rulers issued coins, barter was prevalent. Villages paid a portion of their agricultural produce as revenue to the rulers, while its craftsmen received a part of the crops at harvest time for their services.

Religion, especially Hinduism, and the caste and the joint family systems, played an influential role in shaping economic activities. The caste system functioned much like medieval European guilds, ensuring the division of labour, providing for the training of apprentices and, in some cases, allowing manufacturers to achieve narrow specialization. For instance, in certain regions, producing each variety of cloth was the speciality of a particular sub-caste.

Estimates of the per capita income of India (1857–1900) as per 1948–49 prices.

Textiles such as muslin, Calicos, shawls, and agricultural products such as pepper, cinnamon, opium and indigo were exported to Europe, the Middle East and South East Asia in return for gold and silver.

Assessment of India's pre-colonial economy is mostly qualitative, owing to the lack of quantitative information. One estimate puts the revenue of Akbar's Mughal Empire in 1600 at £17.5 million, in contrast with the total revenue of Great Britain in 1800, which totalled £16 million. India, by the time of the arrival of the British, was a largely traditional agrarian economy with a dominant subsistence sector dependent on primitive technology. It existed alongside a competitively developed network of commerce, manufacturing and credit. After the fall of the Mughals, India was administered by Maratha Empire. The maratha empire's budget in 1740s, at its peak, was Rs. 100 million. After the loss at Panipat, the maratha empire disintegrated into confederate states of Gwalior, Baroda, Indore, Jhansi, Nagpur, Pune and Kolhapur. Gwalior state had a budget of Rs. 30M. However, at this time, British East India company entered the Indian political theatre. Until, 1857, when India was firmly under the British crown, the country remained in a state of political instability due to internecine wars and conflicts.

Colonial

An aerial view of Calcutta Port taken in 1945. Calcutta, which was the economic hub of British India, saw increased industrial activity during World War 2.

Colonial rule brought a major change in the taxation environment from revenue taxes to property taxes resulting in mass impoverishment and destitution of the great majority of farmers. It also created an institutional environment that, on paper, guaranteed property rights among the colonizers, encouraged free trade, and created a single currency with fixed exchange rates, standardized weights and measures, capital markets, a well developed system of railways and telegraphs, a civil service that aimed to be free from political interference, and a common-law, adversarial legal system. India's colonisation by the British coincided with major changes in the world economy—industrialisation, and significant growth in production and trade. However, at the end of colonial rule, India inherited an economy that was one of the poorest in the developing world, with industrial development stalled, agriculture unable to feed a rapidly growing population, one of the world's lowest life expectancies, and low rates of literacy.

An estimate by Cambridge University historian Angus Maddison reveals that India's share of the world income fell from 22.6% in 1700, comparable to Europe's share of 23.3%, to a low of 3.8% in 1952. While Indian leaders during the Independence struggle, and left-nationalist economic historians have blamed colonial rule for the dismal state of India's economy in its aftermath, a broader macroeconomic view of India during this period reveals that there were sectors of growth and decline, resulting from changes brought about by colonialism and a world that was moving towards industrialisation and economic integration.While the exact sectors of growth and decline is of questionable importance, the overall effect of the changes brought about by colonialism, and India's degree of industrialisation and economic integration of India under the British rule on India's economy can be assessed from the kind of economy India inherited after the end of the colonial rule in India.

Independence to 1991

Indian economic policy after independence was influenced by the colonial experience (which was seen by Indian leaders as exploitative in nature) and by those leaders' exposure to Fabian socialism. Policy tended towards protectionism, with a strong emphasis on import substitution, industrialization, state intervention in labour and financial markets, a large public sector, business regulation, and central planning Jawaharlal Nehru, the first prime minister, along with the statistician Prasanta Chandra Mahalanobis, carried on by Indira Gandhi formulated and oversaw economic policy. They expected favourable outcomes from this strategy, because it involved both public and private sectors and was based on direct and indirect state intervention, rather than the more extreme Soviet-style central command system. The policy of concentrating simultaneously on capital- and technology-intensive heavy industry and subsidising manual, low-skill cottage industries was criticized by economist Milton Friedman, who thought it would waste capital and labour, and retard the development of small manufacturers.

India's low average growth rate from 1947–80 was derisively referred to as the Hindu rate of growth, because of the unfavourable comparison with growth rates in other Asian countries, especially the "East Asian Tigers".

After 1991

Major improvements in educational standards across India has helped its economic rise. Shown here is the Indian School of Business at Hyderabad, ranked number 20 in global MBA rankings by the Financial Times of London in 2008

In the late 80s, the government led by Rajiv Gandhi eased restrictions on capacity expansion for incumbents, removed price controls and reduced corporate taxes. While this increased the rate of growth, it also led to high fiscal deficits and a worsening current account. The collapse of the Soviet Union, which was India's major trading partner, and the first Gulf War, which caused a spike in oil prices, caused a major balance-of-payments crisis for India, which found itself facing the prospect of defaulting on its loans. In response, Prime Minister Narasimha Rao along with his finance minister Manmohan Singh initiated the economic liberalisation of 1991. The reforms did away with the Licence Raj (investment, industrial and import licensing) and ended many public monopolies, allowing automatic approval of foreign direct investment in many sectors. Since then, the overall direction of liberalisation has remained the same, irrespective of the ruling party, although no party has tried to take on powerful lobbies such as the trade unions and farmers, or contentious issues such as reforming labour laws and reducing agricultural subsidies.

Since 1990 India has emerged as one of the wealthiest economies in the developing world; during this period, the economy has grown constantly, but with a few major setbacks. This has been accompanied by increases in life expectancy, literacy rates and food security.

While the credit rating of India was hit by its nuclear tests in 1998, it has been raised to investment level in 2007 by S&P and Moody's. In 2003, Goldman Sachs predicted that India's GDP in current prices will overtake France and Italy by 2020, Germany, UK and Russia by 2025 and Japan by 2035. By 2035, it was projected to be the third largest economy of the world, behind US and China.

Economy of India

The economy of India, measured in USD exchange-rate terms, is the twelfth largest in the world, with a GDP of around $1 trillion (2008). It recorded a GDP growth rate of 9.1% for the fiscal year 2007–2008 which makes it the second fastest big emerging economy, after China, in the world. At this rate of sustained growth many economists forecast that India would, over the coming decades, have a more pronounced economic effect on the world stage. Despite this phenomenal rate of growth, India's large population has a per capita income of $2,659, measured by PPP, and $978, measured in nominal terms (revised 2007 estimate). The World Bank classifies India as a low-income economy.

India's economy is diverse, encompassing agriculture, handicrafts, textile, manufacturing, and a multitude of services. Although two-thirds of the Indian workforce still earn their livelihood directly or indirectly through agriculture, services are a growing sector and play an increasingly important role in India's economy. The advent of the digital age, and the large number of young and educated populace fluent in English, is gradually transforming India as an important 'back office' destination for global outsourcing of customer services and technical support. India is a major exporter of highly-skilled workers in software and financial services, and software engineering. Other sectors like manufacturing, pharmaceuticals, biotechnology, nanotechnology, telecommunication, shipbuilding, aviation , tourism and retailing are showing strong potentials with higher growth rates.

India followed a socialist-inspired approach for most of its independent history, with strict government control over private sector participation, foreign trade, and foreign direct investment. However, since the early 1990s, India has gradually opened up its markets through economic reforms by reducing government controls on foreign trade and investment. The privatisation of publicly owned industries and the opening up of certain sectors to private and foreign interests has proceeded slowly amid political debate.

India faces a fast-growing population and the challenge of reducing economic and social inequality. Poverty remains a serious problem, although it has declined significantly since independence.