India has a mixed economy. Half of India's workers rely on agriculture, the signature of a traditional economy. One-third of its workers are employed by the services industry, which contributes two-thirds of India's output. The productivity of this segment is made possible by India's shift toward a market economy. Since the 1990s, India has deregulated several industries. It's privatized many state-owned enterprises, and opened doors to foreign direct investment.
What Type of Economy Is India?
India's Strengths
India is an attractive country
for outsourcing and a cheap source of imports. Its economy has these five
comparative advantages. The cost of living is lower than in the United States.
Its gross domestic product per capita is $7,200, half that of China or Brazil.
This is an advantage because Indian workers don't need as much income since
everything costs less. India has many well-educated technology workers. English
is one of India’s official subsidiary languages. Many Indians speak it. This,
combined with the high level of education and the wage differential, attracts
U.S. technology and call centers to India. It's hard to quantify how many jobs
have been lost to outsourcing, and estimates range from 104,000 to 700,000.
India’s 1.3 billion people come
from a wide range of economic and cultural backgrounds. This diversity can be a
strength or a challenge. Socioeconomic status is largely determined by
geography. India’s three main regions each have distinct class and education
divisions. Many people leave the rural areas to live in the cities. Most of
them are young and educated. They seek a higher quality of life. The level of
urbanization reached 34% in 2018. The profitable Indian film industry is called
"Bollywood." It's a portmanteau of Bombay, now called Mumbai, and
Hollywood. Bollywood makes more than twice the number of movies Hollywood
makes.
These comparative advantages mean
great opportunities for American business. Foreign direct investment in Indian
companies could be very profitable. The Indian middle class is almost 250
million people, bigger than the U.S. middle class. It will continue to drive
India's consumer spending and economic growth. In addition to FDI, India has
seen more than 100 initial public offerings in the last 18 months.
India's Challenges
<!--[if !supportLists]-->1. 1. Prime Minister Modi is a Hindu nationalist leader. Many blame him for the violence
against Muslims while he was governor of India's Western region of Gujarat.
3. U.S. monetary policy has hurt India’s economy. For example, when the Federal Reserve began its quantitative easing program, the value of India's rupee fell. The resulting inflation forced India's central bank to raise its interest rates. This action slowed India's economic growth, eventually resulting in what some called mild stagflation in 2013.30 It had 10.9% inflation for the year and a growth rate of 6.4% Slow growth came from contractionary monetary policy to stem inflation. By 2017, inflation had slowed to 3.6%.
4.nvestors backed off from India and other emerging markets when the U.S. Federal Reserve began tapering its quantitative easing program. When the dollar rose surged in 2014, it forced the value of the rupee and other emerging market currencies down.
7. Sea level rise threatens India's 4,660 miles of coastline. It threatens megalopolises like Mumbai, Chennai, and Kolkata, which are home to over 48 million people. Many of these cities are built on landfill. In Mumbai, seawater spills onto the main ocean side promenade d