INDIAN GDP GROWTH
There have been major structural changes in the Indian economy. India has changed and is changing the world. Global economists believe India and China sustain world demand even if the U.S slips into recession. The U.S is no longer the sole locomotive of the world economy pulling others along. India has become a small locomotive too.
Due to extremely buoyant conditions in world economy which has enabled even Africa to grow at 5.5%, India is growing just 2.5% faster than Africa which is not considered a big difference.
India is not merely the beneficiary of a global up swing. It has made major structural adjustments that have lifted it to a higher growth path. Indiaâ€™s merchandise exports have almost doubled in just three years from $ 52.7 billion to $ 102.7 billion in 2005-06. This pace is unprecedented. Previous episodes of rapid export growth depended on sharp falls in the rupee which made exports temporarily competitive. But in the last 3 years exports have boomed despite the rupee actually rising 9.3% against the dollar. For the first time India is exporting on the basis of rising productivity not unsustainable price cuts. In the current fiscal first half exports have continued to grow rapidly by 22.7%.
Service exports have more than doubled in the last two years mainly due to computer software. India now accounts for a respectable 2.5% of world service exports against only 1% of merchandise exports.
Export orientation the share of exports of goods plus services in GDP has virtually tripled from 7.2% to 20.5% (1990-91 to 2004-05). At this rate India will catch up with Chinaâ€™s current ratio of 26% in three years. That is a huge structural change.
Although foreign direct investment in India has been modest, foreign portfolio investment has shot up. Total foreign investments have risen from zero when reforms began to $ 20 billion last year. Remittances from overseas Indians have risen even faster to about $ 24 billion. These huge inflows explain why Indiaâ€™s forex reserves have risen to an unimaginable $ 165 billion despite record high oil prices and trade deficit.
Phone lines from 5 million in 1990 increased to a whopping 140 million this year. Last month alone six million new mobile phones were added. The telecom revolution has brought unprecedented connectivity to India and is now set to penetrate rural areas too.
The share of agriculture in GDP has fallen from over half at independence to just 21%, and food grains now account for only half of agriculture. The other half being animal husbandry, fisheries, fruits, vegetables which are growing much faster. Indian economy once heavily depended up on the monsoon can withstand even major droughts now.
All these trends represent major structural changes in the economy. India has changed and is changing the world. The clinching evidence for Indiaâ€™s new strength is the rise of GDP in dollars. World Bank data show that Indiaâ€™s GDP has shot up by a phenomenal 16.4% per year during the last 3 years.
No longer do Indian companies take shelter behind protectionist walls. Instead they are now taking over foreign giants. They have the confidence of Global financers who now rate Reliance Industries and Tata Steel as more creditworthy than Ford or General Motors.