Economy : An Overview

India is the second largest country in the world, in terms of both population and arable land. It has 16 % of the world's population and 12 % of the world's arable land. It also is the sixth largest economy with respect to Gross Domestic Product (GDP).

The reforms undertaken since July 1991 have led to a strong revival of economic growth, rapid increase in employment, reduction in poverty, a boom in exports and a decline in inflation. Growth of real GDP at factor cost, which had fallen to merely 0.8% in the crises year 1991-92, recovered within a year to reach 5.1% in 1992-93. This represents one of the fastest economic recoveries from a macroeconomic crises by international standards. Thus, despite the situation in 1991-92, the average growth of 5.7% over the first four years of the Eighth Plan was higher than the Plan target of 5.6%.

Reforms of the external sector and the consequent achievements on the balance of payments front have played a key role in the turnaround in the growth of GDP, employment and social indicators. The country witnessed a strong, three-year boom with annual export growth averaging 19% in 1993-94 and 1994-95 and then accelerating to 24% in the first nine months of 1995-96. Growth of foreign direct investment has averaged 100% per annum over 1992-93 to 1994-95. The same level was maintained over the first eight months of 1995-96.

The country's external debt situation has improved markedly in the past few years. The growth of external debt between March 31, 1991 and September 30, 1995 averaged US$ 2.2 billion per year, compared to the much higher average annual increase of US$ 4.9 billion a year, between end-March 1986 to end-March 1991.

However, the task of economic reforms is far from over. The strong economic performance of recent years willl require continuing effort to widen the ambit of economic reform, and difficult decisions will have to be taken to deal with the emerging challenges within India and worldwide.

Note : Data generally relates to 1991-93.