Indain Economy: Factsheet

India: Factsheet

Annual data	2007(a)	Historical averages (%)	2003-07
Population (m)	1,130	Population growth	1.7
GDP (US$ bn; market exchange rate)	1,131(b)	Real GDP growth	8.9
GDP (US$ bn; purchasing power parity)	3,094(b)	Real domestic demand growth	9.4
GDP per head (US$; market exchange rate)	1,000	Inflation	4.9
GDP per head (US$; purchasing power parity)	2,740	Current-account balance (% of GDP)	-0.4
Exchange rate (av) Rs:US$	41.3(b)	FDI inflows (% of GDP)	1.3

Major exports 2007/08(a)	% of total	Major imports 2007/08(a)	% of total
Engineering goods	23.0	Petroleum&petroleum products	33.4
Petroleum products	15.6	Electronic goods	8.5
Textiles&textile products	11.9	Non-electrical machinery	8.2
Gems&jewellery	12.4	Gold&silver	7.5
Leading markets 2007/08(a)	% of total	Leading suppliers 2007/08(a)	% of total
US	13.0	China	11.4
UAE	9.7	US	5.5
China	6.8	Germany	4.0
UK	4.1	Singapore	3.4

India gained independence in 1947, after two centuries of British colonial rule. Partition at the same time created the state of Pakistan, with which India has fought three wars—two over the disputed territory of Kashmir. India is the second most populous country in the world, with 1.1bn people in 2007. Its economy is the 12th-largest in the world measured in nominal US dollars, but rises to fourth-largest when measured at purchasing power parity exchange rates. The large (and inefficient) public sector co-exists with a sizeable and diversified private sector.

Political structure: India has been a democracy since independence. The growing importance of regional parties has made coalition government the norm at federal level. Democratic procedures are, on the whole, respected. The prime minister is the leader of the government, requiring the support of a majority in parliament. The president is the head of state, and, although limited in executive power, can influence the formation of governments at both state and national level when no party has gained an outright majority. The judiciary is formally independent, and is becoming increasingly assertive.

Policy issues: Strong economic growth allowed the government to undertake big spending programmes at the same time as it reduced the fiscal deficit from 6% of GDP in fiscal year 2000/01 (April-March) to 2.8% of GDP in 2007/08. But further progress on narrowing the deficit is unlikely in the forecast period, given major government spending initiatives and the ongoing slowdown in economic growth. The fallout from the global financial crisis has had an increasingly severe impact on India, causing the stockmarket and the currency to slump and the banking sector to experience a sudden liquidity crisis.

Taxation: The top rate of personal income tax and corporation tax for Indian companies is 30%. The corporation tax rate for foreign companies is 40%. However, a complex system of exemptions reduces the effective tax rate for Indian companies to less than 20%. All firms pay a 10% tax on distributed profits. Customs duties have been lowered substantially, but remain high by international standards.

Foreign trade: India's trade deficit widened to US$79.1bn in 2007 in balance-of-payments terms, from US$62.1bn in 2006. Exports performed strongly in 2007, rising by 23% to US$151.3bn, but imports jumped by 25% to US$230.5bn, largely owing to higher international oil prices and strong demand for industrial inputs and consumer goods. China overtook the US as India's largest trade partner in 2007/08.