The Indian Economy
April 3, 2008 - 8:02 AM
Overall Rating:
  • Currently 2.5/5 Stars.
Add CommentBack
The economy of India, when measured in USD exchange-rate terms, is the twelfth largest in the world, with a Gross Domestic Product (GDP) of US $1.25 trillion (2008). It is the third largest in terms of purchasing power parity. India is the second fastest growing major economy in the world, with a GDP growth rate of 9.4% for the fiscal year 2006%u20132007.

India's economy is on the fulcrum of an ever increasing growth curve. With positive indicators such as a stable 8-9 per cent annual growth, rising foreign exchange reserves, a booming capital market and a rapidly expanding FDI inflows. The economy has been growing at an average growth rate of 8.8 per cent in the last four fiscal years (2003-04 to 2006-07), with the 2006-07 growth rate of 9.6 per cent being the highest in the last 18 years. Significantly, the industrial and service sectors have been contributing a major part of this growth, suggesting the structural transformation underway in the Indian economy.

For example, industrial and services sectors have logged in a 10.63 and 11.18 per cent growth rate in 2006-07 respectively, against 8.02 per and 11.01 cent in 2005-06. Similarly, manufacturing grew by 8.98 per cent and 12 per cent in 2005-06 and 2006-07 and transport, storage and communication recorded a growth of 14.65 and per cent 16.64 per cent, respectively.

Another significant aspect has been the broad-based nature of the growth process. While new economy industries like Information Technology and biotechnology have been growing around 30 per cent, significantly old economy sectors like steel have also been major contributors in the Indian growth process. For example, India has moved up two places to become the fifth largest steel producer in the world. And with its manufacturing and service sectors on a searing growth path, Lehman Brothers Asia estimates India to grow by as much as 10 per cent every year in the next decade.

Major highlights and declarations (Budget 2008)

  • The growth rate of the economy has been 8.8%
  • Service sector is the key player and expected to grow at 10.7 %
  • Total food grain output has been 219.32 tonnes; all time high
  • Education at the center of the social sector reforms
  • Rs. 34,400 crores to be allocated for education
  • Rs, 13,100 crores to be allocated for Sarva Shiksha Abhiyaan
  • Rs. 8,000 crores allocated for Mid-Day Meal Program
  • 6,000 model high schools to come up
  • 16 central universities to be established
  • 3 IITs to be set up in Bihar, Rajasthan and Andhra Pradesh
  • Rs. 85 crores allocated for the development of a knowledge society
  • All knowledge bodies to be linked through broadband
  • Scholarships to encourage science and research
  • 3 IIScs to be set up in Trivandrum and Bhopal
  • Rs. 4,554 crores to be allocated for Secondary Education Scheme
  • Allocation for National Rural Health Mission increased by 15%
  • LIC coverage for all women regulated Self-help Groups attached to banks
  • Rs. 12,050 crores to strengthen health services in rural area
  • Direct tax proposal is going to be revenue neutral by nature
  • Corporate income tax rate to be kept unchanged
  • No change in Corporate surcharge tax
  • Tax exemption limit increased from Rs. 1,10,000 to Rs. 1,50,000
  • Tax exemption limit for women increased from Rs. 1,45,000 to 1,80,000
  • Tax rate for the income bracket Rs. 1,50,000 to 3,00,000 to be 10%
  • Tax rate for the income bracket Rs. 3,00,000 to Rs. 5,00,000 to be 20%
  • Income above Rs. 5,00,000 to be taxed at 30%
  • Exemption limit for the senior citizens to be increased from Rs. 1,95,000 to 2,25,000
  • Excise duty on small cars to be 14%
  • Excised duty reduced to 8% on water purification devices
  • General CENVAT rate on the common products to be reduced from 16% to 14%
  • Excise duty on paper and paper goods to be reduced
  • Excise duty on the pharma products to be reduced to 14%
  • Duties on aluminum scrap and steel melting scarp to be reduced
  • Taxes on convergence products to be lowered
  • Duty on non filtered cigarettes to be increased
  • The excise duties on anti-AIDS drugs to be lowered
  • Allocation for defense to be increased by 10%
  • Rs. 32,676 crores to be allocated for PDS subsidy
  • Risk Capital Fund to be formed in SIDBI
  • Rs. 12,966 crores to be allocated for the National Highway Development Program
  • Rs. 800 crores to be allocated for power sector reforms
  • Rashtriya Krishi Vikas Yojana to receive Rs. 2,80,000 crores
  • Rs. 7,200 crores to be allocated for the Ministry of Women and Child Development
  • Loan waiver for marginal and small farmers
  • Rs. 1,042 crores to be allocated for anti-Polio drive
  • Rs. 540 crores to be allocated for the development of minority districts
  • Rs. 31,280 crores to be allocated for Bharat Nirman Program