With more than 1.2 billion people, it is the second most populous country, the third largest global economy in terms of purchasing power parity (5.7% of world GDP), and the 10th largest in terms of nominal GDP (2.7%).
The structure of the Indian economy is predominantly services based (57% of GDP), followed by agriculture (15%), mining and manufacturing (28%).
Despite achieving annual growth of 6.6% since 1990, India is poor, with more than one third of its population living below the poverty line (roughly US $1 per day).
Average US$ per-capita income (US$1600 for 2012) is about 1/25th of New Zealand’s per capita income.
A long period of outperformance has seen Chinese per-capita continue to climb above its Indian counterpart (Chinese per-capita income was about US$6100 in 2012). Measures of income inequality place India about middle of the pack – below China and the US, but on a par with New Zealand.
Of the 250 million Indian households, around three million have average household income of at least US$38,000, with another 12 million with annual household income above US $12,500.
India’s importance to New Zealand is growing.
This reflects India’s expanding economy which has emerged strongly from the global recession, its growing geopolitical importance, and its increased openness to the rest of the world.
Merchandise trade
Since joining the World Trade Organisation (WTO) in 1995, there have been successive moves to liberalise trade and lower tariffs.
India now accounts for about 2% of global trade, with its total merchandise trade (exports and imports) to reach $780 billion in 2012 (about 49% of GDP), as per the forecast of International Monetary Fund (IMF).
By comparison, this trade portion was only 15% of GDP in 1975.
India’s major merchandise exports are mineral fuels, jewellery, clothing and manufacturing. Its major export destinations are the European Union countries and US (which account for about 40% of total exports), although of late India has been sending an increasing portion of exports to oil rich or rapidly developing economies (such as the United Arab Emirates and China).
According to October 2012 IMF projections, the Indian economy is set for annual average growth of 6.3% over the next five years.
Growing pains
With India still moving towards a market economy, there are growing pains beyond usual business cycle factors. Problems with wastage, inefficiencies due to poor infrastructure, poor labour laws, reasonably high-income inequality and corruption suggest that the transition is unlikely to be seamless, with differences in sector and regional performance likely to intensify.
While less than 30% of the resident population is urbanised, approximately 100 million persons had moved into urban areas over the last 10 years, with a further 250 million to 300 million expected to migrate in the next 25 to 30 years.
Such massive change, with greater demand for urban clusters, poses considerable challenges. Urban areas typically have higher average income.
This shift is expected to continue with changes in the structure of retailing and proliferation of IT and supporting industries boosting urban output.
The share of GDP generated from rural areas is expected to decline from 50% now to 30% from 2015, with 70% of jobs created in urban areas.
Even within urban areas, disparities are likely to grow as old methods (i.e. small- scale retail) are replaced by new.
The above is an extract of an ANZ Bank Survey titled, ‘A Closer look at India’ prepared by Sunil Kaushal (Head of India Relations), Mark Smith (Senior Economist) and Con Williams (Rural Economist). Read another report in this Section. ANZ is the Title Sponsor (jointly with Radio Tarana) of the Indian Newslink Sir Anand Satyanand Lecture, scheduled to be held at Stamford Plaza Hotel, Auckland from 630 pm on Monday, July 29, 2013. Vino Ramayah, Executive Chairman of Medtech Global Limited will be the Guest Speaker, with ‘Transparency: Myth or Reality’ as the theme of his address. For more details write to editor@indiannewslink.co.nz
