Indian Economy

Indian economy snapshot (as of 2026):

• GDP: ~$4 trillion nominal (5th largest in the world), $14 trillion PPP (3rd).
• GDP per capita: ~$2,800 nominal.
• Real GDP growth: ~6–7% annually (post-pandemic recovery).
• Currency: Indian Rupee (₹) — symbol designed by D. Udaya Kumar (2010).
• Reserve Bank of India founded April 1, 1935; nationalized 1949. Mumbai HQ.

Sectors of the economy:

• Primary (agriculture, mining, fishing): ~15% of GDP, ~45% of workforce.
• Secondary (manufacturing, construction): ~25% of GDP, ~25% of workforce.
• Tertiary (services): ~55% of GDP, ~30% of workforce. (Higher than typical at this development stage — services-led growth.)

Five-Year Plans (1951–2017):

• 1st Plan (1951–56): focus on agriculture (Mahalanobis-Nehru model).
• 2nd Plan: heavy industry (Mahalanobis model).
• … 12th Plan ended 2017.
• Replaced by NITI Aayog (2015 onwards) — doesn't issue 5-year plans.

Economic Reforms (1991):

• Liberalization, Privatization, Globalization (LPG).
• Triggered by balance-of-payments crisis (1991).
• Finance Minister: Dr. Manmohan Singh. PM: P. V. Narasimha Rao.
• Removed License Raj; opened FDI; devalued rupee.

Banking system:

• Central bank: Reserve Bank of India (RBI). Governor (since 2018, extended): Shaktikanta Das (until 2024); now Sanjay Malhotra (from Dec 2024).
• Public sector banks (post 2020 mergers): 12 (SBI is the largest).
• Private sector banks: HDFC, ICICI, Axis, etc.
• RRBs (Regional Rural Banks): for rural credit.
• Cooperative banks.

Monetary policy tools (RBI):

• Repo rate: rate at which RBI lends to commercial banks.
• Reverse Repo: rate at which RBI borrows from commercial banks.
• CRR (Cash Reserve Ratio): % of deposits banks must keep with RBI.
• SLR (Statutory Liquidity Ratio): % of deposits banks must keep in liquid assets.
• Bank rate: rate of last-resort RBI lending.

Taxes:

• Direct taxes: paid directly to government — Income Tax, Corporate Tax.
• Indirect taxes: paid via intermediaries — GST (replaced VAT, excise, service tax in 2017), customs duty.
• GST has slabs: 0%, 5%, 12%, 18%, 28% (plus cess on luxury/sin goods). GST Council = Centre + States.

Inflation measures:

• CPI (Consumer Price Index): cost of basket of consumer goods. Headline inflation.
• WPI (Wholesale Price Index): wholesale prices.
• Food inflation, core inflation (excluding food and fuel).
• RBI targets CPI inflation at 4% ± 2% (i.e. 2–6%).

Stock markets:

• BSE (Bombay Stock Exchange) — oldest in Asia (1875). Sensex = 30 large stocks.
• NSE (National Stock Exchange) — 1992. Nifty 50 index.
• Regulator: SEBI (Securities and Exchange Board of India).

Budget:

• Presented annually by Finance Minister to Parliament (usually 1st February).
• Two parts: Revenue Budget + Capital Budget.
• Fiscal deficit = Total expenditure − Total revenue (excluding borrowing). Target as % of GDP (~3% under FRBM Act, but exceeded during pandemic).

Agriculture in India:

• Employs ~45% of workforce. Contributes ~15% of GDP.
• Largest producer of milk, jute, pulses, spices, mangoes, bananas. 2nd in rice, wheat, sugarcane, groundnut, fruits, vegetables.
• Green Revolution (1960s): M. S. Swaminathan introduced high-yield wheat (Mexican varieties). Made India self-sufficient in food grains.
• White Revolution / Operation Flood (1970s): Verghese Kurien, Anand model. Made India world's largest milk producer.
• Blue Revolution: fisheries.
• Yellow Revolution: oilseeds.
• Minimum Support Price (MSP) announced for 23 crops.

Industries:

• Steel: Tata Steel (Jamshedpur, 1907), SAIL (Bhilai, Bokaro, Durgapur, Rourkela, Burnpur, Salem), JSW.
• Automobiles: Maruti Suzuki, Tata, Mahindra, Hyundai, Bajaj. India = world's 4th largest car market and largest 2-wheeler market.
• IT/Software: TCS, Infosys, Wipro, HCL. Hubs: Bengaluru, Hyderabad, Pune, Chennai, Gurugram.
• Textiles: Surat, Ahmedabad, Bhilwara, Tiruppur, Ludhiana, Coimbatore.
• Pharmaceuticals: "Pharmacy of the World" — Cipla, Sun, Reddy's, Lupin. Largest provider of generic drugs.

India's "Unicorn" startup ecosystem (>$1B valuation): 3rd in the world (after US, China). Notable: Flipkart (acquired by Walmart), Paytm, Ola, Zomato, Byju's, Razorpay, etc.

India's external trade:

• Top exports: gems & jewellery, refined petroleum, drugs, textiles, machinery, vehicles, IT services.
• Top imports: crude oil, gold, electronics, machinery, organic chemicals.
• Major trade partners: USA, China, UAE, Saudi Arabia, Switzerland.

Current account & forex:

• India runs a current-account deficit (CAD) typically 1–3% of GDP.
• Forex reserves: ~$650–700 billion (4th largest in world).

India's per-capita income (~$2,800) puts it as a "lower middle-income" country.

Income inequality measures:

• Gini coefficient (0 = equal, 1 = totally unequal): India ~0.35.
• Lorenz curve.

Recent (2025–2026) developments:

• GST collections crossing ₹2 lakh crore in some months.
• PLI schemes (Production Linked Incentives) in 14 sectors to boost manufacturing.
• Digital payments: UPI processes >10 billion transactions/month.
• India became world's most populous nation in 2023.
• GIFT City (Gujarat) — emerging international financial hub.
• Atmanirbhar Bharat (Self-Reliant India): launched 2020.
• Vande Bharat trains: semi-high-speed indigenous trains.

Key terms to know:

• Inflation: rise in general price level. Reduces purchasing power.
• Deflation: fall in general price level (rare; harmful).
• Stagflation: high inflation + slow growth.
• Recession: 2 consecutive quarters of negative GDP growth.
• Recession technical (US def): NBER's broader criteria.
• GDP = Gross Domestic Product (output within country).
• GNI = Gross National Income (GDP + net income from abroad).
• NNP = GNP − depreciation.
• Per capita income = National income / population.
• PPP (Purchasing Power Parity): adjusts for cost-of-living differences.
• Repo rate cut → cheaper loans → more spending → growth (and inflation risk).
• Hike → costlier loans → cooling of demand.