Indian economy Salient Features: Economy transformed from primarily

agriculture, forestry, fishing, and textile manufacturing in 1947 to major heavy

industry, transportation, and telecom-munications industries by late 1970s. Central
government planning 1950 through late 1970s giving way to economic reforms and
more private-sector initiatives in 1980s and 1990s. Agriculture predominates and
benefits from infusion of modern technology by government. World Bank Group and
developed nations provide most aid; Japan largest donor. Major trade partners
United States, Japan, European Union, and nations belonging to Organization of the
Petroleum Exporting Countries (OPEC--see Glossary).

India Currency and Exchange Rate: Rupee; US$1 = Rs35.67 (July 1996).

Fiscal Year (FY): April 1-March 31.

Gross Domestic Product (GDP): Rs36.7 trillion (nearly US$1.2 trillion) in 1994
(estimated). GDP annual average growth rate 3.8 percent in 1994.

Indian Foreign Trade: Principal export trade with European Union, United States,
and Japan. Main commodities agricultural and allied products, gems and jewelry, and
ready-made garments. Iron ore, minerals, and leather and leather products also
important. Exports 7.7 percent of GDP in FY 1992. Principal import trade with
European Union, United States, and Japan. Major imports (28 percent of total) oil
products from Middle East. Other major imports chemicals, dyes, plastics,
pharmaceuticals, uncut precious stones, iron and steel, fertilizers, nonferrous metals,
and pulp paper and paper products. Imports 9.3 percent of GDP in FY 1992.

Balance of Payments: Negative trade balance in late 1980s and early 1990s. In
1993 estimated exports US$22.7 billion versus US$23.9 billion imports.

Foreign Aid: Most aid provided by Aid-to-India Consortium, consisting of World

Bank Group and Austria, Belgium, Britain, Canada, Denmark, Germany, France,
Italy, Japan, Netherlands, Norway, Sweden, and United States. Japan largest aid
granter and lender; US$337 million grants between 1984 and 1993, US$2.4 billion
loans in same period. Indian aid program to Bhutan and Nepal; smaller programs
assist Bangladesh and Vietnam.

Industry: Increasing share (27.4 percent in FY 1991) of GDP, but employed only
about 9 percent of the work force in 1991. Basic industries: textiles, steel and
aluminum, fertilizers and petrochemicals, and electronics and motor vehicles.

Energy: India importer of petroleum and natural gas but has abundant coal,
hydroelectric power (especially in parts of North India), and burgeoning nuclear
power industry.

Minerals: Less than 2 percent share of GDP in FY 1990 and 1 percent of labor force
involved in mining and quarrying in 1991. Basic minerals: iron, bauxite, copper, lead,
zinc, mica, uranium ore, rare earths.

Services: Some 39.8 percent of GDP in FY 1991, then employing about 13 percent
of work force. Large and diverse transportation system.
Agriculture: Declining share (32.8 percent) of GDP but employed majority of
workers (67 percent of total labor force) in FY 1991. Around 45 percent (136 million
hectares) of total land cultivated, 27 percent double cropped, effectively giving India
173 million hectares of cultivated land. Another 5 percent (15 million hectares)
permanent pastureland or planted in tree crops or groves. Farming by smallholders;
large landholders divested in 1970s. Rice, wheat, pulses, and oilseeds dominate
production, but millet, corn (maize), and sorghum important; commercial crops--
sugar (India world's largest producer), cotton, jute also important. Green Revolution
technological advances and improved high-yielding variety seeds, and increased
fertilizer production and irrigation between mid-1960s and early 1980s. Dairy
farming, fishing, and forestry important parts of agricultural sector. Agricultural
products around 18 percent of total exports.

Science and Technology: Major government investment (80 percent of total) in

and control of science and technology sector; 200 national laboratories, 200
government-sector research and development institutions, and about 1,000 research
and development units in industrial sector supported by both public and private
funds. Substantial investments in research and development in defense, nuclear
science, space, and agriculture.
ECONOMIC SURVEY 1999-2000
Macroeconomic overview

Introduction

1.1 The Indian economy is expected to grow by 5.9 per cent in 1999-2000. More
importantly, an industrial recovery seems finally to be underway from the cyclical
downturn of the previous two years. Growth of GDP from manufacturing will almost
double to 7 per cent in 1999-2000 from 3.6 per cent in 1998-99. The growth in GDP from
the construction sector is expected to accelerate to 9.0 per cent in 1999-2000 from 5.7 per
cent in 1998-99. The performance of infrastructure sectors improved markedly. The
inflation rate dropped to international levels of 2 to 3 per cent for the first time in
decades. The balance of payments survived the twin shocks of the East-Asian crisis and
the post-Pokhran sanctions with a low current account deficit and sufficient capital
inflows. This was demonstrated by the continuing rise in foreign exchange reserves by
over US $ 2.4 billion during the year until the end of January, 2000 coupled with a
relatively stable exchange rate. Export performance has improved on par with the better
performing emerging economies. The restoration of confidence in industry has been best
reflected in the rise in the stock market during 1999. Primary issues have increased by
almost half during the first nine months of 1999-2000.

1.2 Inflation dropped dramatically in 1999, surprising many observers by remaining at

low levels. As of January 29, 2000, the annual inflation as measured by the WPI was 2.9
per cent (point to point), down from a peak 8.8 per cent on September 25, 1998 (Table
1.1) . The inflation rate has been less than 4 per cent since April 1999, with the result that
the average (52 week) inflation was 3.3 per cent (provisional) as on January 29, 2000.
The decline in inflation as measured by the CPI for industrial workers has been even
more dramatic, falling to zero in November 1999 from a peak of 19.7 per cent in
November 1998. The strong agricultural growth in 1998-99, the increasing openness of
the economy to manufactured imports along with the fall in international prices has
contributed greatly to this decline. With the removal of import and export controls on
agricultural products and their replacement by a rational, stable tariff structure, sharp
fluctuations in agricultural prices arising from domestic supply shocks could also be
greatly moderated.

1.3 Exports showed a strong recovery in 1999, growing by 12.9 per cent in April-
December 1999 in US $ value (DGCI&S customs data). Software exports, which are not
captured in the customs data, also continued to show vigorous growth of over fifty per
cent during April-September 1999. Despite a 57.8 per cent growth in the US $ value of
oil imports in April-December 1999, overall import growth remained at a manageable 9.0
per cent. As a result the trade deficit was lower in value (US $) during April-December
1999 as compared to April-December 1998. Non-oil imports, however, grew by only 1.1
per cent in this period, as prices of non-fuel primary commodities were projected to fall
in 1999 by over 11 per cent and unit values of manufactures by about half a per cent. The
downturn in gold and silver imports and the sharp fall in imports of capital goods (by
about 30 per cent for April-November 1999) also contributed to the slow growth of non-
oil imports.

1.4 The current account deficit, which defied gloomy forecasts based on the presumed
after effects of the Asian crisis and the economic sanctions, ended at 1 per cent of GDP in
1998-99. This was because international price declines affected both imports and exports.
With the sharp rise in oil prices the current account deficit is expected to revert to a more
normal level in 1999-2000. During April-September 1999 the current account deficit was
higher than in the first half of 1998-99 and is expected to end the year at about 1.6 to 1.8
per cent of GDP. During the same period net capital flows have grown by over one-third.
This suggests that the increase in the current account deficit will be financed quite
comfortably. Both portfolio investment and non-resident deposit inflows have shown
significant improvement. FDI flows, however, continue to be lower, and this is a source
of serious concern, particularly given the medium term target of US $ 10 billion of FDI
inflows. An expansion of the "automatic route" coupled with further liberalisation should
help reverse this trend next year. ECB inflows also remain sluggish, but this is mainly
due to weak domestic demand and easy liquidity available for corporations in the
domestic market.

GDP, saving and investment

1.5 There was a sharp upturn in GDP growth in 1998-99, which reversed the deceleration
in growth seen in 1997-98. GDP (at factor cost) growth accelerated to 6.8 per cent in
1998-99 from 5 per cent in 1997-98 (Table 1.2) . The primary supply side factor for the
recovery was agriculture. GDP from the agriculture and allied sectors, which had fallen
by 1.9 per cent in 1997-98 recovered dramatically to grow by 7.2 per cent in 1998-99.
GDP from agriculture & allied sectors hence contributed 1.9 per cent points to the overall
growth rate of 6.8 per cent in 1998-99. As in the previous year GDP from "public
administration & defence" contributed 0.7 per cent point to the overall GDP growth rate
in 1998-99. This was primarily because of the wage increase for government employees
consequent to the Fifth Central Pay Commission’s recommendations. The wage increase
was largely implemented by the Central Government in 1997-98 and by the Sate
Governments in 1998-99.

1.6 Unlike in 1997-98, when the GDP from manufacturing had led to a substantial
decline in GDP growth; the growth rate of manufacturing at 3.6 per cent in 1998-99 was
only 0.4 per cent point less than the year before. GDP from electricity, gas and water
supply and from trade, hotels and transport grew faster in 1998-99 than the year before,
while mining and quarrying suffered decline, construction and financial services showed
marked deceleration.

1.7 On the demand side, private consumption recovered in 1998-99 from its slump in
1997-98, with real consumption growth doubling from 2.6 per cent in 1997-98 to 5.1 per
cent in 1998-99 (Table 1.3) . Recovery in agricultural income clearly contributed to this
growth as indicated by the lower saving rate in terms of household saving in physical
assets. Perhaps the windfall income of government servants, which was initially saved
also started getting spent. Growth of government consumption expenditures in real terms
has accelerated to 14.5 per cent in 1998-99 from 10.6 per cent in 1997-98. This provided
an even greater stimulus to demand than in the previous year and contributed 1.6 per cent
points to overall demand growth in 1998-99.

1.8 A sharp slump in investment, however, had a deflationary impact and countered part
of this stimulus. Total investment (at 1993-94 prices) declined by about half a per cent in
1998-99 after increasing by over 13 per cent the year before. This deceleration in
investment was linked to the deceleration in manufacturing and the slump in agriculture
in 1997-98. Average real interest rates, as measured by the cut-off yield on 364-day
treasury bills (adjusted by the WPI inflation), declined by 1 per cent point in 1998-99.
Though this followed a decline in the real rate by 2 per cent points over the previous year,
it was not sufficient to counter the negative factors.

1.9 Gross domestic saving declined sharply in 1998-99 to 22.3 per cent of GDP (Table
1.4) . The 2.4 per cent points of GDP decline in the saving rate resulted from a 1.4 per
cent point decline in public saving and a 1 per cent point decline in household saving in
physical form (i.e. direct investment). The corporate saving rate also declined to 3.8 per
cent of GDP in 1998-99 from 4.3 per cent of GDP in 1997-98. Though household
financial saving increased as a proportion of GDP, the overall private saving rate declined
by 1 per cent of GDP. The decline in saving rate of the government and households is a
counterpart of the higher consumption growth during 1998-99. Though in the short run,
growth in government consumption may have had a positive effect on aggregate
recovery, government dis-saving (mainly reflecting high revenue deficits) will have to be
reduced if aggregate investment and growth of the economy is to increase.

1.10 Real gross domestic capital formation in 1997-98 at 26.9 per cent of GDP (constant
price) was only marginally less than the previous peak rate (Table 1.5) . It however
declined in 1998-99 to 25.1 per cent of GDP, marginally less than the five-year average.
About half of this decline was due to a fall in household investment, as it reverted back to
its earlier trend after a sharp rise the previous year. Lower investment in the trade sector
was a factor in this decline. The lagged effects of poor agricultural performance
contributed to this decline. The other significant factor was a halving of the errors &
omissions component of gross capital formation. It was quite encouraging, however, that
despite two years of rather slow growth in manufacturing, corporate investment edged up
to 8.8 per cent of GDP (constant prices) in 1998-99. It suggests that companies are
responding to the challenges of competition by upgrading their plant and machinery.

1.11 Gross fixed capital formation (GFCF) declined by only 0.3 per cent point to 23 per
cent of GDP (constant price) in 1998-99. This is around the same as the five-year
average. The decline in GFCF was attributable to a 0.6 per cent point of GDP decline in
household fixed investment to 7.7 per cent of GDP (in 1998-99). Both the corporate and
public fixed investment rate increased marginally. Corporate fixed investment at 8.7 per
cent of GDP (constant price) in 1998-99 was close to its peak of 8.9 per cent in 1996-97.
Public fixed investment rose from its previous year trough of 6.4 per cent to 6.6 per cent
of GDP (constant price). An important factor from the perspective of future productivity
improvement was that growth in investment in machinery and equipment (in 1993-94
prices) accelerated to 4.9 per cent in 1998-9. It had decelerated sharply in 1996-97 and
declined further in 1997-98 to almost nil.

1.12 Inventories as a proportion of GDP (constant prices) after a build up of 0.7 per cent
in 1997-98 declined by 0.4 per cent of GDP in 1998-99. One fourth of this was in the
public sector and three-fourth in the private sector (Table 1.5).

1.13 As direct data on capital formation is not available for 1999-2000 we have to look at
various indicators. These present a very mixed picture. Though growth of domestic
capital goods production remains reasonably good, it is decelerating. Imports of capital
goods have, on the other hand, fallen sharply. Growth in disbursements by development
finance institutions has decelerated, while that by Investment Institutions has accelerated.
Growth of sanctions has, however, decelerated for both sets of institutions. While
primary issues have reversed the declining trend of several years by a 46% rise, foreign
direct investment (FDI) has declined for the second year in succession. The average real
interest rate as measured by the 364-day treasury bills cut-off yield (using the WPI) is
about 5 per cent points higher during the first 9 months of 1999-2000 than it was in 1998-
99. Investment growth is likely to revive with the recovery of private aggregate demand.
Sustaining high growth will, however, require a steep rise in FDI, a structural reduction
in inflationary expectations, reduction of the fiscal deficit and the elimination of
remaining interest controls and rigidities in financial markets.
 ECONOMY ON RECOVERY PATH
ECONOMIC SURVEY 1998-99 PRESENTED IN THE PARLIAMENT
GDP GROWTH TOUCHES 5.8% DURING 1998-99
The Economic Survey 1998-99 which was tabled today in the Parliament indicates
that the country’s economy made a substantial recovery by achieving a GDP growth rate
of 5.8% in current financial year compared to 5.0% achieved last year. This recovery has
been made despite the east-Asian crisis and its effect on world import demand and on
international capital markets. It is also substantial considering the rather turbulent and
unfavorable international development, unusual volatility in capital and forex markets of
industrial countries and continued drought in capital flows to developing countries.

The recovery in 1998-99 is attributed to the rebounding performance of the agriculture

and

allied sector which is projected to grow by 5.3% from a negative growth (-1%) noticed in
1997-98.

Trade, hotels, transport and communication is the only other category where growth
accelerated from 5.7% in 1997-98 to 6.8% in 1998-99.

The growth of GDP from manufacturing has slipped to 5.7%, that from electricity, gas
and water supply to 6.3% and mining to 0.1%.

The gross domestic saving declined to 23.1% of GDP in 1997-98 from 24.4% of GDP
in 1996-97. Public savings decreased by 0.5% & household physical saving by 1.0% of
GDP. Household financial savings bucked the declining trend in savings rate by rising to
10.3% of GDP in 1997-98 from 9.8% in 1996-97. This is possibly due to the savings
made from salary arrears received consequent upon the Fifth Pay commission
recommendations.
 Real gross domestic capital formation dropped marginally from 26% of GDP (constant
price) in 1996-97 to 25.6% of GDP in 1997-98. However, corporate fixed investment
increased from 7.9% of GDP in 1995-96 to 8.3% of GDP in 1996-97 and further to 9% of
GDP in 1997-98. This indicates that the Indian corporate industry is responding to the
challenges of domestic and global competitions.

PRODUCTION

After a decline in agricultural output by 1% in 1997-98 agricultural value added is

estimated to rebound by 5.3% in 1998-99. This is being attributed to the Rabi foodgrain
output of 96.5 million tonnes for Nov.-Dec., 1998 which is higher than Rabi 1997-98 by
5.2 million tonnes. The 1998-99 foodgrain output is expected to be abovt 195.3 million
tonnes despite adverse climatic conditions (floods, heat waves and heavy rainfalls) that
prevailed in the country during the year.

As measured by the index of industrial production (IPP) industrial growth rate for April-
Dec.,

1998 was only 3.5%, down from 6.7% for April-Dec., 1997. The greatest deceleration in
1998 was in basic goods. The only industrial sub-sector which bucked the trend of
declining growth rate was capital goods and this achieved a growth rate of 9.8% which is
higher than 6.7% achieved in the corresponding year of 1996-97. It was 9.3% in 1996-97
& 5.2% in 1997-98.

The government initiated several reforms for providing a stimulus to industrial growth
to impart dynamism to the overall growth process. These are

 Delicensing of coal and lignite, petroleum (other than crude).

 Delicensing of sugar.
 Dereserving of coal and lignite and mineral oils.
 Companies to buy back their own shares subject to restriction of buy back to
25 percent.
 Patents ordinance promulgated.
  Recommendations of National Task Force on Information Technology
accepted.
Infrastructure performance during April-December 1998 has declined to 2%
compared to 4% of the corresponding period of 1997. Only electricity generation
recorded an increased growth rate of 6.6% in April-December 1998. A number of
reforms were introduced in infrastructure sector to improve the quality,
availability and viability.

 Indian Electricity Act and Electricity (Supply) Act

amended to provide for private investment in power
transmission.
 Urban Land (Ceiling and Regulation) Act repealed.
 Policy for providing internet license announced.
 A National Integrated Highway Project and north-
south corridors launched.

MONEY AND PRICES

The point to point annual rate of inflation in wholesale price index rose during 1998-99
to a peak of 8.8% in September but it came down to 4.6% by the end of January 1999.
This steep rise was temporary and in fact the wholesale price of manufacturing goods
rose only by 3.4% till January 30th, 1999 and the fuel and power prices have declined
during the same period. It is only the sub-sectors that are shielded from competition by
internal controls and quantitative restrictions on imports that have seen large increase in
price.

FISCAL DEVELOPMENTS

The fiscal deficit as a proportion of GDP at current market prices is now placed at
5.5% and 5.1% for 1997-98 (R.E.) and 1998-99 (R.E.) respectively.

FINANCIAL DEVELOPMENT

The year witnessed a slow but steady improvement in the performance of public sector
banks. Sanctions and disbursement by all India financial institutions continued the strong
growth in 1998-99. During April-December 1998 sanctions grew by 36.9% and
disbursement grew by 12.5%.

Capital Markets remained subdued during most part of the year. But the Sensex which
declined to 2878 by 5th October, 1998 remained below 3000 for three months and then
shot up to 3400 in January 1999.

The SEBI implemented the recommendation of Informal Group set to revive the
primary markets.

Also, measures were taken to revive the secondary market.

BALANCE OF PAYMENTS

Inspite of turbulent international environment India's balance of payment remained

moderately comfortable. But net capital inflow are expected to be low in 1998-99 than in
1997-98, as a result of deceleration in the inflow of foreign direct investment and
commercial borrowing and outflow of portfolio investments by FII.

The trade deficit (on a BOP basis) increased from 3.7% of GDP in 1996-97 to 3.9% in
1997-98. Performance continued to be a major source of concern in the current financial
year with exports having declined by 2.9% during April-December 1998.

FOREIGN CURRENCY ASSETS

Foreign Currency Assets of the RBI rose from US$22.4 billion at the end of March,
1997 to US$26.0 billions at the end of March, 1998. Total foreign exchange reserves
(including gold and SDRs) at the end of January, 99 amounted to US$30.4 billions.

India’s stock of external debt at the end of September,’98 stood at US$95.2 billions as
against US$93.9 billions at the end of March, 98.

SOCIAL SECTOR

Government’s efforts to reduce poverty and unemployment has resulted in the poverty
ratio declining from 54.9% in 1973-74 to 36% in 1993-94. The other achievements in the
sector are:

 29.74 million additional employment opportunity was generated during 94-97.

 Real wages for unskilled agricultural labour has increased from 0.7% in 95-96
to 4.88 in 97-98.
Increased availability of health care and family welfare services has resulted in the
reduction of all India death rate, birth rate and infant mortality rates. The central plan
allocation for social sector has increased by 36% for family welfare and women and child
development in 1998-99 (BE) over 1997-98 (BE) and the outlay for health has gone up
by 25% in 1998-99 (BE) over 1997-98 (BE).

ENVIRONMENT

Large scale industrialization and spread of transportation combined with the pressure
of population growth have added to the difficulty of preserving a clean environment. This
degeneration imposes a cost on the society, with the burden of such cost being dis-
proportionality high for the poor who live and depend on such natural ecological system.
So the choices of economic development should be such that it increases clean
production and consumption.

ISSUES AND PRIORITY

The most intractable and long standing issue confronting the Government is that of
fiscal prudence. This calls for building a political consensus on various aspects of fiscal
problems like fiscal deficits, revenue deficits, unsustainable subsidies and unproductive
expenditure.

Long term fiscal sustainability calls for bringing down of primary deficit below Zero.
Fiscal consolidation is also necessary for containing inflation, reducing interest rates,
promoting investment and growth. A liberal and flexible policy for export production and
marketing is also needed in view of the globalization of the economy. A more friendlier
operational environment for exports is necessary. Greater liberalization in trade and
agriculture is also desirable for promoting exports.

Radical reforms in the areas of infrastructure services, agriculture and factor markets
are necessary to initiate a virtual cycle of export growth, employment generation and
economic growth. With only a year left before the start of the 21st century it is perhaps an
appropriate time to start preparing for a second generation of reforms. Such reforms
should address factor markets, public sector, government and other public institutions,
legal systems, state level policies and procedures and reform of critical sectors like
infrastructure agriculture, education and R&D.

 In view of the developmental necessities to meet the needs of poor people it is

important to refocus government priorities to those areas which are the basic
responsibility of the government and to withdraw from areas where private initiatives can
achieve the goals more efficiently.
ECONOMY
India's population is estimated at nearly 1.07 billion and is growing at 1.7% a year. It has the world's 12th
largest economy--and the third largest in Asia behind Japan and China--with total GDP of around $570
billion. Services, industry and agriculture account for 50.7%, 26.6% and 22.7% of GDP respectively. Nearly
two-thirds of the population depends on agriculture for their livelihood. About 25% of the population lives
below the poverty line, but a large and growing middle class of 320-340 million has disposable income for
consumer goods.

India is continuing to move forward with market-oriented economic reforms that began in 1991. Recent
reforms include liberalized foreign investment and exchange regimes, industrial decontrol, significant
reductions in tariffs and other trade barriers, reform and modernization of the financial sector, significant
adjustments in government monetary and fiscal policies and safeguarding intellectual property rights.
Economy of India : analysis, Character and Structure.

INDIAN ECONOMY HAS MADE great strides in the years since independence. In 1947
the country was poor and shattered by the violence and economic and physical
disruption involved in the partition from Pakistan. The economy had stagnated since
the late nineteenth century, and industrial development had been restrained to
preserve the area as a market for British manufacturers. In fiscal year (FY--see
Glossary) 1950, agriculture, forestry, and fishing accounted for 58.9 percent of the
gross domestic product (GDP--see Glossary) and for a much larger proportion of
employment. Manufacturing, which was dominated by the jute and cotton textile
industries, accounted for only 10.3 percent of GDP at that time.

India's new leaders sought to use the power of the state to direct economic growth
and reduce widespread poverty. The public sector came to dominate heavy industry,
transportation, and telecommunications. The private sector produced most consumer
goods but was controlled directly by a variety of government regulations and
financial institutions that provided major financing for large private-sector projects.
Government emphasized self-sufficiency rather than foreign trade and imposed strict
controls on imports and exports. In the 1950s, there was steady economic growth,
but results in the 1960s and 1970s were less encouraging.

Beginning in the late 1970s, successive Indian governments sought to reduce

state control of the economy. Progress toward that goal was slow but steady, and
many analysts attributed the stronger growth of the 1980s to those efforts. In the
late 1980s, however, India relied on foreign borrowing to finance development plans
to a greater extent than before. As a result, when the price of oil rose sharply in
August 1990, the nation faced a balance of payments crisis. The need for emergency
loans led the government to make a greater commitment to economic liberalization
than it had up to this time. In the early 1990s, India's post-independence
development pattern of strong centralized planning, regulation and control of private
enterprise, state ownership of many large units of production, trade protectionism,
and strict limits on foreign capital was increasingly questioned not only by policy
makers but also by most of the intelligentsia.

India's population continues to grow at about 1.8% per year and is estimated at one
billion. While its GDP is low in dollar terms, India has the world's 13th-largest GNP.
About 62% of the population depends directly on agriculture.

Industry and services sectors are growing in importance and account for 26% and
48% of GDP, respectively, while agriculture contributes about 25.6% of GDP. More
than 35% of the population live below the poverty line, but a large and growing
middle class of 150-200 million has disposable income for consumer goods.

India embarked on a series of economic reforms in 1991 in reaction to a severe

foreign exchange crisis. Those reforms have included liberalized foreign investment
and exchange regimes, significant reductions in tariffs and other trade barriers,
reform and modernization of the financial sector, and significant adjustments in
government monetary and fiscal policies.

The reform process has had some very beneficial effects on the Indian economy,
including higher growth rates, lower inflation, and significant increases in foreign
investment. Real GDP growth was 6.8% in 1998-99, up from 5% in the 1997-98
fiscal year. Growth in 1999-2000 is expected to be around 6%. Foreign portfolio and
direct investment flows have risen significantly since reforms began in 1991 and
have contributed to healthy foreign currency reserves ($32 billion in February 2000)
and a moderate current account deficit of about 1% (1998-99). India's economic
growth is constrained, however, by inadequate infrastructure, cumbersome
bureaucratic procedures, and high real interest rates. India will have to address
these constraints in formulating its economic policies and by pursuing the second
generation reforms to maintain recent trends in economic growth.

India's trade has increased significantly since reforms began in 1991, largely as a
result of staged tariff reductions and elimination of non-tariff barriers. The outlook
for further trade liberalization is mixed. India has agreed to eliminate quantitative
restrictions on imports of about 1,420 consumer goods by April 2001 to meet its
WTO commitments. On the other hand, the government has imposed "additional"
import duties of 5% on most products plus a surcharge of 10% over the past 2
years. The U.S. is India's largest trading partner; bilateral trade in 1998-99 was
about $10.9 billion. Principal U.S. exports to India are aircraft and parts, advanced
machinery, fertilizers, ferrous waste and scrap metal, and computer hardware. Major
U.S. imports from India include textiles and ready-made garments, agricultural and
related products, gems and jewelry, leather products, and chemicals.

Significant liberalization of its investment regime since 1991 has made India an
attractive place for foreign direct and portfolio investment. The U.S. is India's largest
investment partner, with total inflow of U.S. direct investment estimated at $2 billion
(market value) in 1999. U.S. investors also have provided an estimated 11% of the
$18 billion of foreign portfolio investment that has entered India since 1992.
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 and processing, and
mining.

As India moved into the mid-1990s, the economic outlook was mixed. Most analysts
believed that economic liberalization would continue, although there was
disagreement about the speed and scale of the measures that would be
implemented. It seemed likely that India would come close to or equal the relatively
impressive rate of economic growth attained in the 1980s, but that the poorest
sections of the population might not benefit.

1995 LOC data. Economy of India

LIST OF TRADE ASSOCIATION in INDIA

• Agarwoods Exporters Association

• Ahmedabad Electrical Merchants & Contractors Association
• Ahmedabad Tiles Mfrs Association
• Ajmer Electric Association
• All India Air Conditioning & Refrigerator Association
• All India Brick & Tile Manufacturers Federation
• All India Chain Association
• All India Coated Steel Manufacturers Association
• All India Electric Motor Manufacturers Association
• All India Glass Manufacturers Federation
• All India Importers Association
• All India Instrument Manufacturers & Dealers Association
• All India Iron & Steel Exporters Association
• All India Manufacturers Organisation
• All India Metal Forging Association
• All India Pottery Manufacturers Association
• Association of Sanitary & Domestic Engg (I) Ltd.
• Baroda Electrical Contractors & Merchants Association
• Bengal Brickfield Owners Association
• Bengal Glass Mfrs Association
• Bhavanagar Electric Merchants Association
• Bombay Bolts & Nuts Merchants'Association
• Bombay Canvets & Tarpaulin Merchants Association
• Bombay Cutley, Toys, Glass, Beads & Sundry Merchants'Association
• Bombay Ferrous & Non.Ferrous Manufacturers Association
• Bombay Firewood & Timber Commision Agents Association
• Bombay Hardware Merchants'Association
• Bombay Housing & Area Development Board Contractors Association
• Bombay Marble & Tile Merchants'Association
• Bombay Pipes & Fittings Merchants Association
• Bombay Sanitaryware Association
• Bombay Society of Model Engineers
• Bombay Tarpaulin Merchants'Association
• Bombay Timber Merchants Association
• B.P.T. Constractors Association
• Builders Association of India
• Bukdhana Dist Constractors Association
• C.P. & Berar Electrical Contractors Association
• Calcutta Cabinet Makers'& Furnitures'Association
• Calcutta Electric Traders Association
• Calcutta Goods Transport Association
• Calcutta River Transport Association
• Cast Iron Spun Pipe Mfrs Association
• Cement Manufacturers Association
• Cement Research Institute of India
• Cement Tiles Manufacturers Association
• Chandigarh Dealers & Contractors Association
• Cochin Coir Merchants Association
• Concrete Association of India
• Deccan Manufacturers Association
• Delhi Electric Merchants Association
• Delhi Electric Traders Association
• Earthmoving Equipment Parts Association of Eastern India.
• East Indian Bolt & Nut Dealers Association
• Eastern India Air Conditioning & Refrigerator Association
• Eastern Regional Electrical Contractor's Association (India) Ltd.
• Electrical Cable Dev Association
• Electrical Lamp & Component Manufacturers Association of India.
• Electric Dealers Association
• Electric Traders Association
• Electrical Contractors & Merchants Association
• Electrical Contractors Association
• Electrical Contractors Association of Eastern India
• Electrical Contractors Association of Maharashtra
• Electrical Contractors, Merchant & Manufacturers Association
• Electrical Dealers & Contractors Association
• Electrical Merchants Association
• Electrical Research & Development Association
• Engineers Association of Northern India
• Estate Agents Association of India
• Federation of Electricity Undertakings of India
• Federation of Indian Export Organisations
• Federation of Indian Plywood & Panel Industry
• Indian Hot Dip Galvanizers Association
• Indian Institute of Landscape Architects
• Indian Institute of Road Transport
• Indian Lamp Factories Association
• Indian National Group of the Institutional Association for Bridge & Structural
Engg.
• Indian Paint Association
• Indian Pest Control Association
• Indian Plywood Industries
• Indian Pump Manufacturers Association
• Indian Roads & Transport Dev Association (Northern Region)
• Indian Rope Mfrs Association
• Indian Society of Engineers
• Indian Society of Lighting Engineers
• Indian Water Works Association
• Indian Wire Industrial Association
• Indian Wire Ropes Mfrs Association
• Indore Electric Merchants & Contractors Association
• Institution of Public Health Engineers, India
• Institute of Export Information
• Institute of Town Planners India
• Institution of Engineers (India) West Bengal State Centre
• Institution of Milftery Engs
• Institutional of Chartered Engineers
• Jaipur Electric Association
• Jamshedpur Electrical Contractors Association
• Jodhpur Electric Association
• Junagarh Electrical Merchants Association
• Kanpur Constructors Association
• Karnataka Metal Merchants & Manufacturers Association
• Licensed Electrical Contractors of Mysore
• M.P. Paints & Chemical Industries Association
• Madras Electric Traders Association
• Madras Electric Traders Association
• Madurai Electrical & Machinery Dealers Association
• Magnet Wires & Cables Manufacturers Association
• Maharashtra Chamber of Commerce & Industries
• Morbi Roofing Tiles Manufacturers Association
• National Council for Cement & Building Materials
• The Institution of Engineers (India)
• Mysore Engineers Association
• Orissa Glass Manufacturers Association
• Overseas Construction Council of India
• Plywood Manufacturers Association of India
• Plywood Manufacturers Association of West Bengal
• Precision Screw Manufacturers Association
• Promoters & Builders Association of Poona
• Institution of Milftery Engs
• Institutional of Chartered Engineers
• Jaipur Electric Association
• Jamshedpur Electrical Contractors Association
• Jodhpur Electric Association
• Junagarh Electrical Merchants Association
• Kanpur Constructors Association
• Karnataka Metal Merchants & Manufacturers Association
• Licensed Electrical Contractors of Mysore
• M.P. Paints & Chemical Industries Association
• Madras Electric Traders Association
• Madurai Electrical & Machinery Dealers Association
• Magnet Wires & Cables Manufacturers Association
• Maharashtra Chamber of Commerce & Industries
• Morbi Roofing Tiles Manufacturers Association
• National Council for Cement & Building Materials
• Orissa Glass Manufacturers Association
• Overseas Construction Council of India
• Plywood Manufacturers Association of India
• Plywood Manufacturers Association of West Bengal
• Precision Screw Manufacturers Association
• Promoters & Builders Association of Poona
• Town & Country Planning Organisations
• U.P. Barbed Wire Manufacturers Association
• U.P. Concrete Pipe Manufacturers Association
• U.P. Electrical Contractors & Merchants Association
• U.P. Glass Manufacturers Syndicate
• Vidarbha Electric Contractors Association
• Vidarbha Industries Association
• Vijaywada Electric Dealers Association
• Wiring Contractors Association
• Wood Furniture Makers Association
2004

Real GDP growth for the fiscal year ending March 31, 2004 was 8.17%, up from the drought-depressed
4.0% growth in the previous year. Growth for the year ending March 31, 2005 is expected to be between
6.5% and 7.0%. Foreign portfolio and direct investment in-flows have risen significantly in recent years. They
have contributed to the $120 billion in foreign exchange reserves at the end of June 2004. Government
receipts from privatization were about $3 billion in fiscal year 2003-04.

However, 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. India eliminated quotas on 1,420 consumer imports in 2002 and has announced its intention to
continue to lower customs duties. However, the tax structure is complex with compounding effects of various
taxes.

The United States is India's largest trading partner. Bilateral trade in 2003 was $18.1 billion and is expected
to reach $20 billion in 2004. 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.
Revenues from IT industry are expected to cross $20 billion in 2004-05. Software exports were $12.5 billion
in 2003-04. PC penetration is 8 per 1,000 persons, but is expected to grow to 10 per 1,000 by 2005. The
cellular mobile market is expected to surge to over 50 million subscribers by 2005 from the present 36
million users. The country has 52 million cable TV customers.

The United States is India's largest investment partner, with total inflow of U.S. direct investment estimated
at $3.7 billion in 2003. 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 $112 billion in 2003, up from $105 billion in 2002. Bilateral assistance was
approximately $2.62 billion in 2002-03, with the United States providing about $130.2 million in development
assistance in 2003. The World Bank plans to double aid to India to almost $3 billion over the next four years,
beginning in July 2004.