Economic Sector in India

Indian Economy grew by 5.4 per cent in 2001-02, which is considered to be

one of the highest growth rates in the world for the year. This growth is
supported by a growth rate of 5.7 per cent in agriculture and allied sectors,
3.3 percent in industry and 6.5 per cent in services.
Overall agricultural output is estimated to increase by nearly 7 per cent in
2001-02. Food grains production is expected to rise to 209 million tons
compared with 196 million tons in 2000-01. Prospects of agricultural
production in 2001-02 are considered to be bright as a result of normal
monsoon and relatively favorable distribution of rainfall over time and
regions.

While the Indian industry sector grew by 3.3 per cent, with in industry sector
segments like construction showed a lower growth in 2000-01, there was
marked improvement in the growth rates of manufacturing (from 4.2 per
cent in 1999-00 to 6.7 per cent in 2000-01) and mining and quarrying
(from 2 per cent to 3.3 per cent during the same period). The growth rate of
electricity, gas and water supply remained almost invariant at around 6.2
per cent for both 1999-2000 and 2000-01.
During 1993-94 to 1999-2000 the service sector had achieved consistently
high growth rates in the range of 7.1 per cent to 10.5 per cent. But for the
first time in 2000-01, the growth rate of the service sector declined to 4.8
per cent due to poor performance by financial sector, trade hotels and
restaurants, and community and social services
.
Agriculture
The agriculture sector, for so long the mainstay of the Indian Economy, now
accounts for only about 20 per cent of GDP, yet employs over 50 per cent
of the population. For some years after independence, India depended on
foreign aid to meet its food needs, but in the last 35 years, food production
has risen steadily, mainly due to the increase in irrigated areas and
widespread use of high-yield seeds, fertilizers, and pesticides.
The Country has large grain stockpiles (around 45 million tons) and is a net
exporter of food grains.
Cash crops, especially tea and coffee, are the major export earners. Indiais
the world's largest producer of tea, with annual production of around 470
million tons, of which 200 million tons is exported. India also holds around
30 per cent of the world spice market, with exports around 120,000 tons per
year.

With a view to strengthening the sector, building infrastructure for

handling, transportation, and storage of food grains has been granted
"infrastructure status" and will be eligible for a tax holiday. Further,
processors of food and vegetables are exempt from excise duty.

Manufacturing Sector
After a decade of reforms, the manufacturing sector is now gearing up to
meet challenges for the new millennium. Investment in Indian companies
reached record levels by 1994 and many multinationals decided to set up
shop in India to take advantage of the improved financial climate. In an
effort to provide a further boost to the industrial manufacturing sector,
Foreign Direct Investment (FDI) has been permitted through the automatic
route for almost all the industries with certain restrictions. Structural reforms
have been undertaken in the excise duty regime with a view to introduce a
single rate and simplify the procedures and rules. Indian subsidiaries of
multinationals have been permitted to pay royalty to the parent company for
license of international brands, etc. Over the period 1992-93 to 1999-2000,
the manufacturing sector has recorded an average annual growth rate of
6.3 per cent and in 2001-02; it recorded a growth of 2.8 per cent.

Companies in the manufacturing sector have consolidated around their

area of core competence by tying up with foreign companies to acquire new
technologies, management expertise, and access to foreign markets. The
cost benefits associated with manufacturing in India, has
positioned India as a preferred destination for manufacturing and sourcing
for global markets.
Financial Sector
An extensive financial and banking sector supports the rapidly expanding
Indian Economy. India boasts of a wide and sophisticated banking network.
The sector also has a number of national and state level financial
institutions. These include foreign and institutional investors, investment
funds, equipment leasing companies, venture capital funds, etc. Further,
theCountry has a well-established stock market, comprising 23 stock
exchanges, with over 9,000 listed companies. Total market capitalization,
on the two dominant stock exchanges, the Bombay Stock Exchange (BSE)
and the National Stock Exchange (NSE), stood at Rs. 6,926 billion and Rs.
7,604 billion respectively, at the end of December 2000. The Indian capital
markets are rapidly moving towards a market that is modern in terms of
infrastructure as well as international best practices such as derivative
trading with stock index futures, addition to the list of compulsory Demat
trading and rolling settlement in certain specified shares, commencement of
internet based trading, etc.

The last year witnessed several Indian companies, mobilizing resources by

tapping the world market through the ADR/GDR route. So as to improve the
liquidity in the ADR/GDR market and to give opportunity to Indian
shareholders to divest their shareholding in the ADR/GDR market abroad,
measures such as two-way fungibility in ADR/GDR issues of Indian
companies has been introduced and sponsorship of ADR/ GDR offerings
against existing shareholding. In addition to the above, 26 per cent foreign
equity has been allowed in the insurance sector and investment and
divestment by venture capital funds and companies registered with SEBI
has been simplified.

FII inflows were USD 2.34 billion (January 2001 to June 2001) compared to
USD 1.5 billion for 2000, showing an upward trend despite depressed stock
market indices. Net cumulative FII inflows crossed USD 14 billion (June
2001).
Services Sector
The main thrust to industrial growth has come from the services sector.
Services contribute to 41 per cent of the GDP. Rapidly, the quality and
complexity of the type of services being marketed is on the rise to match
worldwide standards. Whether it is financial services, software services or
accounting services, this sector is highly professional and provides a major
impetus to theEconomy . Interestingly, this sector is populated with a range
of players who cater to a niche market.

India is fast becoming a major force in the Information Technology sector.

According to the National Association of Software and Service Companies
(NASSCOM), over 185 Fortune 500 companies use Indian software
services. The world's software giants such as Microsoft, Hughes and
Computer Associates who have made substantial investments in India are
increasingly tapping this potential. A number of multi-nationals have
leveraged the relative cost advantage and highly skilled manpower base
available in India, and have established shared services and call centers in
India to cater to their worldwide needs.

The software industry was one of the fastest growing sectors in the last
decade with a compound annual growth rate exceeding 50 per cent.
Software service exports increased from US$ 4.02 billion in 1999-2000 to
US$ 6.3 billion in 2000-01, thereby registering a growth of 57 per cent.
India's success in the software sector can be largely attributed to the
industry's ability to cultivate superior knowledge through intensive R&D
efforts and the expertise in applying the knowledge in commercially viable
technologies.

Indian Industrial Sector

Industrial Growth Rates: Use Based
Apr-
1995- 1996- 1997- 1999- 2000- 2001-
SECTORS Weight June
96 97 98 00 01 02
2002*
All Industries 100 13 6.1 6.7 6.7 5 2.8 4
Basic Goods 35.57 10.8 3 6.9 5.5 3.9 2.8 5.1
Capital
9.26 5.3 11.5 5.9 6.9 1.8 -3.9 1.6
Goods
Intermediates 26.51 19.4 8.1 8 8.8 4.7 1.6 1.1
Consumer
28.66 12.8 6.2 5.5 5.7 8 6 6.5
Goods
a) Durables 5.36 25.8 4.6 7.8 14.1 14.5 11.5 0.5
b) Non-
23.3 9.8 6.6 4.8 3.2 5.8 4 8.7
Durables

Infrastructure
The road transport sector has been declared a priority and will have access
to loans at favorable conditions. The Monopoly and Restrictive Trade
Practices Act (MRTP Act) was passed in order to encourage large industry
to enter the road sector.

The National Highways Act has been modified to help the reduction of tolls
on national motorways, bridges and tunnels. Calcutta's Howrah Bridge is
the world's busiest with a daily flow of 57,000 vehicles and innumerable
pedestrians. Private participation in the energy sector has been
encouraged with the reduction of import duties, a five-year tax exemption
for new energy projects and a 16% return on equity.

The government is also following a new telecommunications policy that

aims for the improvement of quality to a worldwide standard and, as a
result, India could emerge as a major producer and exporter of
telecommunication systems. Advantageous policies in this sector are
encouraging private and foreign participation. Given below is a profile of the
present Indian Union Infrastructure:
3.3 m km-
Motorway network
1,448,629 Km
No. Goods transport 1,600,000
vehicles
Railways 62,486 Km
No. Railway stations 7,000
Produce transported
350,000,000 tons
by rail (1992-93)
No. International
5
airports
No. National airports 90
No. large ports 11
No. small and medium
139
ports
Goods traveling
166,610,000 tons
through ports
Merchant fleet 443 ships
No. Post offices (2001) 155,000
nergy production
78,000 Mw
capacity (91-92)
nergy generated
547.12 billion kWh
(2000)
By Siddhartha
Class-X, Section-B
Roll no.-11, School no.-1926