Introduction:

Geographical Location of India:

Regarding the location of India, it lies in the northern hemisphere. By area, India is the seventh largest
country in the world. It consists of twenty-eight states and seven union Territories. Area covered by India
is 3.3 million sq km. The Indian mainland measures 3214 km from north to south between extreme
latitudes and about 2933 km from east to west between extreme longitudes. Its land frontier is
approximately 15200 km. regarding area, India accounts for only 2.42% of the total world area.

India lies between 8º4' and 37º6' north of the Equator. Surrounding the country is the Bay of Bengal in the
east, the Arabian Sea in the west and the Indian Ocean in the south. In the neighborhood of India lie
Bangladesh (in east), Pakistan (in west), Nepal (in north-east), China (in north-east) and Sri Lanka (in
south).

http://www.india-travel-agents.com/india-guide/geography.html

Historical Background:
Early Empires:Whereas human settlement in India dates back to roughly 400,000 to 200,000 B.C.,
extensive urbanization and trade appear to have begun in the Indus River Valley around 3000 B.C. with
the Harappan civilization. From this period until the termination of British colonial rule in 1947,
numerous empires ruled various portions of South Asia. Among the most influential early empires were
the Aryans, who migrated from Persia to northwestern India around 2000 B.C. and brought a new
pantheon of anthropomorphic gods, an early form of Sanskrit language, a tiered social system essentially
based on ethnicity and occupation, and religious texts that are an important part of living Hindu traditions.
From 326 B.C. to around 200 B.C., the Mauryan Empire emerged as India’s first imperial power and
ruled its areas with a highly centralized and hierarchical administration. By the thirteenth century, much
of India had been periodically conquered, but rarely held for long, by a steady succession of Turkic rulers
collectively referred to as the Delhi Sultanate or Mughal emperors.

European Influence: European economic competition in India began soon after the Portuguese arrived in
1498, and by the early 1600s it was manifested in the establishment of commercial companies, such as
England’s East India Company, that attempted to capture the spice trade. By the late eighteenth century,
the British had defeated French and Mughal forces to become the preeminent military and economic
power in India. A major turning point in the colonial occupation occurred with the Indian-led Sepoy
Rebellion of 1857 to 1858, which seriously threatened British rule and led to a marked shift in colonial
attitudes and practices.

Independence: In some ways, the victory was bittersweet, as the country emerged with numerous
political, social, and economic difficulties. On Independence Day (August 15, 1947), the country was
partitioned into India and Pakistan, which led to massive migration of Hindus and Muslims and
substantial communal conflict. Furthermore, the British had left India with a rudimentary industrial and
scientific base; tremendous poverty; a large and growing population. Building on the British-established
education system, India developed an educational infrastructure that has trained one of the world’s largest
scientific and technical populations. Using Green Revolution agricultural technologies, the country has
become self-sufficient in food production. Moreover, a combination of socialist planning and free
enterprise from the 1950s to the 1970s led to substantial industrialization with the goal of making India
economically self-sufficient. In the 1980s and 1990s socialist economic planning and import substitution
industries were slowly replaced by liberalization measure.

http://www.mongabay.com/reference/new_profiles/158in.html
Ethnic & Religious Composition:
There are many diverse ethnic groups among the people of India. The 6 main ethnic groups are as
follows.

Negrito, Proto - Australoids or Austrics, Mongoloids, Mediterranean or Dravidian, Western

Brachycephals, Nordic Aryans.

Negroids: The Negritos or the Brachycephalic (broad headed) from Africa were the earliest people to
have come to India. They have survived in their original habitat in Andaman and Nicobar Islands. Some
hill tribes like Irulas, Kodars, Paniyans and Kurumbas are found in some patches in Southern part of
mainland India.
Pro-Australoids or Austrics: These groups were the next to come to India after the Negritos. They are
people with wavy hair lavishly distributed all over their brown bodies, long headed with low foreheads
and prominent eye ridges, noses with low and broad roots, thick jaws, large palates and teeth and small
chins. The Austrics of India represent a race of medium height, dark complexion with long heads and
rather flat noses but otherwise of regular features. The Austrics laid the foundation of Indian civilization.
Their languages have survived in the Central and Eastern India.

Mongoloids: These people are found in the North eastern part of India in the states of Assam, Nagaland,
Mizoram, Meghalaya, Arunachal Pradesh, Manipur, and Tripura. Generally they are people with yellow
complexion, oblique eyes, high cheekbones, sparse hair and medium height.

Dravidians: These are the people of South India. They have been believed to come before the Aryans.
They have different sub-groups like the Paleo-Mediterranean, the true Mediterranean, and the Oriental
Mediterranean. They appear to be people of the same stock as the peoples of Asia Minor and Crete and
pre- Hellenic Aegean's of Greece. They are reputed to have built up the city civilization of the Indus
valley, whose remains have been found at Mohenjo- daro and Harappa and other Indus cities.

Western Bracycephals: These include the Alpinoids, Dinarics and Armenoids. The Parsis and Kodavas
also fall in this category. They are the broad headed people living mainly on the western side of the
country such as the Ganga Valley and the delta, parts of Kashmir, Kathiawar, Gujarat, Maharashtra,
Karnataka and Tamil Nadu.

Nordics or the Indo-Aryans: This group was the last one to immigrate to India. They came to India
somewhere between 2000 and 1500 B.C. They are now mainly found in the northern and central part of
India.

Religious Composition of Indian Population

• Hindus

• Muslims

• Christians

• Sikhs

• Buddhists

• Jains http://www.iloveindia.com/population-of-india/religious-composition.html
Political Structure and Interest Groups:

Government type: Federal republic

Constitution : 26 January 1950; amended many times.

Legal system : Based on English common law; judicial review of legislative acts; accepts
compulsory ICJ jurisdiction with reservations; separate personal law codes apply to
Muslims, Christians, and Hindus.

Executive branch :Chief of state: President Pratibha PATIL (since 25 July 2007); Vice
President Hamid ANSARI (since 11 August 2007).

Head of government: Prime Minister Manmohan SINGH (since 22 May 2004).

Cabinet: Cabinet appointed by the president on the recommendation of the prime minister.

Elections: president elected by an electoral college consisting of elected members of both

houses of Parliament and the legislatures of the states for a five-year term (no term
limits).
Legislative branch: Bicameral Parliament or Sansad consists of the Council of States or
Rajya Sabha (a body consisting of not more than 250 members up to 12 of whom are
appointed by the president, the remainder are chosen by the elected members of the state
and territorial assemblies; members serve six-year terms) and the People's Assembly or
Lok Sabha.

Judicial branch : Supreme Court (one chief justice and 25 associate justices are
appointed by the president and remain in office until they reach the age of 65 or are
removed for "proved misbehavior").

Political pressure groups and leaders :

All Parties Hurriyat Conference in the Kashmir Valley (separatist group); Bajrang Dal
(religious organization); National Socialist Council of Nagaland in the northeast
(separatist group); Rashtriya Swayamsevak Sangh (religious organization); Vishwa
Hindu Parishad (religious organization).
other: numerous religious or militant/chauvinistic organizations; various separatist
groups seeking greater communal and/or regional autonomy.
Status at the international level: The Republic of India is a member of:

• Asian Development Bank (ADB)

• Association of Southeast Asian Nations (ASEAN) (dialogue partner)
• Association of Southeast Asian Nations Regional Forum (ARF)
• Bank for International Settlements (BIS)
• Commonwealth of Nations
• East Asia Summit (EAS)
• European Organization for Nuclear Research (CERN) (observer)
• Food and Agriculture Organization (FAO)
• International Atomic Energy Agency (IAEA)
• International Bank for Reconstruction and Development (IBRD)
• International Chamber of Commerce (ICC)
• International Criminal Police Organization (Interpol)
• International Development Association (IDA)
• International Finance Corporation (IFC)
• International Fund for Agricultural Development (IFAD)
• International Labour Organization (ILO)
• International Maritime Organization (IMO)
• International Mobile Satellite Organization (IMSO)
• International Monetary Fund (IMF)
• International Olympic Committee (IOC)
• International Organization for Standardization (ISO)
• International Telecommunications Satellite Organization (ITSO)
• League of Arab States (LAS) (observer)
• Organization of American States (OAS) (observer)
• Shanghai Cooperation Organization (SCO) (observer)
 • South Asia Co-operative Environment Programme (SACEP)
• South Asian Association for Regional Cooperation (SAARC)
• United Nations (UN)
• United Nations Conference on Trade and Development (UNCTAD)
• United Nations Educational, Scientific, and Cultural Organization (UNESCO)
• United Nations Industrial Development Organization (UNIDO)
• United Nations Institute for Training and Research (UNITAR)
• World Customs Organization (WCO)
• World Health Organization (WHO)
• World Intellectual Property Organization (WIPO)
• World Meteorological Organization (WMO)
• World Tourism Organization (UNWTO)
• World Trade Organization (WTO)
• Group of 15 (G15)
• Group of Twenty Finance Ministers and Central Bank Governors (G20)
• Group of 24 (G24)
• Group of 77 (G77)

Overview of the Economy:

Agriculture Sector:

The performance of agriculture sector influences the growth of the Indian economy. Agriculture
(including allied activities) accounted for 17.1 percent of the Gross Domestic Product (GDP-at constant
prices) in 2008-09. It is the source of livelihood of almost 52% of the total employed labor force in the
country (Economic survey of 2008-09).

With arable land area at 168 million hectares, India ranks second only to the U.S. in size of agriculture. A
well-developed agricultural research system, a significant area of almost 60 million hectares under
irrigation and an increasing productivity in major crops enable Indian agriculture to become a globally
competitive player (http://www.indianagriculture.com).

Institutes:

The Indian Agriculture Research Institute (IARI), established in 1905, was responsible for the research
leading to the “Indian Green Revolution" of the 1970s.

The Indian Council of Agriculture Research (ICAR) is the apex body in agriculture and related allied
fields, including research and education.

The Indian Agriculture Statistics Research Institute develops new techniques for the design of agricultural
experiments, analyses data in agriculture, and specializes in statistical techniques for animal and plant
breeding (http://en.wikipedia.org/wiki/Agriculture_in_India).

Major Crops in India and their seasons:

1. Kharif

The Kharif crop is the summer crop or monsoon crop in India. Kharif crops are usually sown with the
beginning of the first rains in July, during the south-west monsoon season.
• Millets (Bajra and Jowar)
• Paddy (Rice)
• Maize
• Moong (Pulses)
• Groundnut
• Red Chillies
• Cotton
• Soyabean
• Sugarcane
 • Turmeric

2. Rabi Crop

The Rabi crop is the spring harvest or winter crop in India. It is sown in October last and harvested in
March April every year.

• Wheat
• Barley
• Mustard
• Sesame
• Peas

Status of Indian Agriculture Sector:

The Indian agriculture is still underdeveloped on the back of following reasons:

Slow agricultural growth is a concern for policymakers as some two-thirds of India’s people depend on
rural employment for a living. Current agricultural practices are neither economically nor
environmentally sustainable and India's yields for many agricultural commodities are low. Poorly
maintained irrigation systems and almost universal lack of good extension services are among the factors
responsible. Farmers' access to markets is hampered by poor roads, rudimentary market infrastructure,
and excessive regulation.
The low productivity in India is a result of the following factors:

• Irrigation facilities are inadequate, as revealed by the fact that only 52.6% of the land was
irrigated in 2003–04 which result in farmers still being dependent on rainfall, specifically the
Monsoon season.
• Adoption of modern agricultural practices and use of technology is inadequate, hampered by
ignorance of such practices, high costs and impracticality in the case of small land holdings.
• Illiteracy, general socio-economic backwardness, slow progress in implementing land reforms
and inadequate or inefficient finance and marketing services for farm produce.
• http://en.wikipedia.org/wiki/Agriculture_in_India
Industrial Sector:

Though the growth of the industrial sector started to slowdown in the first half of 2007-08, the overall
growth during the year remained as high as 8.5 per cent. The industrial sector witnessed a sharp
slowdown during 2008-09 as a consequence of successive shocks, the most important being the knock-on
effects of the global financial crisis. The pace of slowdown accelerated in the second half of 2008-09 with
the sudden worsening of the international financial situation and the global economic outlook. The year
2008-09 thus closed with the industrial growth at only 2.4 per cent as per the Index of Industrial
Production (IIP) (Economic Survey 2009-09).
In absolute terms, India is 16th in the world in terms of nominal factory output.
(http://en.wikipedia.org/wiki/India%27s_industrial_growth)

Textiles:

The production of textile fabrics that increased by 4.96 per cent during 2007-08 (provisional), declined by
1.9 per cent during 2008-09. Despite modest increase in the production in hosiery and mill sectors, the
decline in the production in power looms and handlooms resulted in the decline in the overall production
of fabrics. Factors such as higher price of cotton, high interest rates, problems in credit availability, high
cost of power and power cuts and demand slowdown in major importing countries led to the decline in
cotton textiles. During 2007-08, textile exports recorded an increase of 15.6 per cent in US dollar terms
and 2.8 per cent in rupee terms. During April 2008–February 2009, however, exports of textiles and
clothing stood at US$ 18.52 billion, recording a decline of 5.3 per cent growth.

Leather and leather products:

Leather products contribute significantly to employment generation and export earnings. The IIP data
show that after robust growth of 11.7 percent in 2007-08, this sector registered a sharp fall of (-) 7 percent
during 2008-09. Being export-oriented, leather has also been one of the sectors that have borne the brunt
of the shrinkage in demand in foreign markets.

Fertilizers:

While the shift from DAP to complexes production affected the production growth of DAP, inadequate
availability of raw materials and intermediates has also been a major bottleneck. There is no domestic
production of MOP, the requirement of which is met fully by imports. Despite manifold increase in
international prices of fertilizers and domestic cost of production, the prices of fertilizers have been kept
at 2002 levels for major fertilizers. The increased burden of cost is borne by the government in the form
of increased subsidy/concessions paid to manufacturers. The subsidy bill, which was Rs. 11,835 crore
during 2003-04, increased to Rs. 40,338 crore during 2007-08.
Rubber and plastic products
As per the IIP production data, this product group declined by 1.5 per cent during 2008-09, compared to
their growth of 8.9 per cent during 2007-08. The growth of tyre industry is linked to the growth of the
auto industry and the replacement market. Two-wheeler production had a modest growth during 2008-09,
so did the two-wheeler tires. The production of rubber footwear grew by 3.9 per cent while sheets
PVC/rubber) fell by 4.7 per cent. PVC pipes and tubes, which have the highest weight in the product
group, witnessed a decline of 7.2 per cent during 2008-09, on top of an impressive growth during the
previous two years.

Steel:
India ranks as the fifth largest producer of steel in the world. The crude steel production grew at an annual
rate of 9.2 per cent during 2003-04 to 2007-08. The increase in production came on the back of capacity
expansion, mainly in the private sector plants, and higher utilization rates. The Indian steel industry has
diversified its product mix to include sophisticated value-added steel used in the automotive sector, heavy
machinery and physical infrastructure. The industry, however, suffers from the high ash content of locally
available metallurgical coal and growing dependence on imported coal and delays in getting iron ore
mining lease has created uncertainties and constraints in the areas of land acquisition and transport
infrastructure. The three years, 2005-06 through 2007-08, witnessed double-digit steel consumption
growth. As consumption grew at almost double the rate of growth in domestic steel production during
2007-08, import of steel rose sharply while exports stagnated. The year 2008-09 has been a watershed
year for the Indian iron and steel industry. The industry has been hit hard by the spiraling cost of imported
coking coal/met coke.

Automobile sector:

Production of the automotive industry grew at a CAGR of 11.5 per cent over last five years. The industry
has a strong multiplier effect on the economy due to its deep forward and backward linkages with several
key segments of the economy. While the industry has been witnessing impressive growth during the last
two decades, the performance after 2006-07 has not been encouraging. The automobile sector recorded
growth of 13.6 per cent in 2006-07. In 2007-08, the industry registered negative growth rate of (-) 2.3 per
cent. However, in 2008-09, the industry has witnessed a modest growth of 3.0 per cent. It is estimated that
the automobile industry generates direct and indirect employment for 10.5 million people.
Service sector of India:

Service Sector in India today accounts for more than half of India's GDP. According to data for the
financial year 2006-2007, the share of services, industry, and agriculture in India's GDP is 55.1 per cent,
26.4 per cent, and 18.5 per cent respectively. The fact that the service sector now accounts for more than
half the GDP marks a watershed in the evolution of the Indian economy and takes it closer to the
fundamentals of a developed economy.

The various sectors that combine together to constitute service industry in India are:

• Trade
• Hotels and restaurants
• Railways
• Other transport and Storage
• Communication (Post, Telecom)
• Banking
• Insurance
• Real Estate
• Business Services
• Personal services
• Community Services (http://www.iloveindia.com/economy-of-india/service-sector.html)

Telecom Industry:

The rapid growth in Indian telecom industry has been contributing to India’s GDP at large. Telecom
industry in India started to set up in a phased approach. Privatization was gradually introduced, first in
value-added services, followed by cellular and basic services. Telecom Regulatory Authority of India
(TRAI), was established to regulate and deal with competition (the service providers). The Indian
telecommunications industry is one of the fastest growing in the world and India is projected to become
the second largest telecom market globally by 2010. (http://www.scribd.com/doc/18590980/Telecom-
Sector-in-India)

Quick Facts:

Total telecom subscribers:429.72 million (March 2009)

Wireless Subscribers: 391.76 million

Wire line subscribers: 37.94 million

Tele density: 36.98%

India’s Service Providers revenue in Q1 (2009): $8.2 million

India’s Rural Mobile Phone Users: 100 million

Industry Revenue (2002-2010)

Year Revenue (US $ Billions)

2002-2003 9
 2003-2004 10

2004-2005 11

2005-2006 15

2006-2007 20

2008-2009 32

2009-2010 (Forecasted) 43

Insurance Sector- A preview: (http://www.scribd.com/doc/10154200/Insurance-Sector-of-India)

The insurance sector in India dates back to 1818, when Oriental Life Insurance Company was
incorporated at Calcutta. Thereafter, few other companies like Bombay Life Assurance Company, in 1823
and Triton Insurance Company, for General Insurance, in 1850 were incorporated. Insurance Act was
passed in 1928 but it was subsequently reviewed and comprehensive legislation enacted in 1938. The
nationalization of life insurance business took place in 1956. India also has the highest number of life
insurance policies in force in the world.

Banking Sector:

The central bank of India is Reserve bank of India. For the past three decades India's banking system has
several outstanding achievements to its credit. The most striking is its extensive reach. It is no longer
confined to only metropolitans or cosmopolitans in India. In fact, Indian banking system has reached even
to the remote corners of the country. This is one of the main reasons of India's growth process.
The government's regular policy for Indian bank since 1969 has paid rich dividends with the
nationalization of 14 major private banks of India. The first bank in India, though conservative, was
established in 1786. From 1786 till today, the journey of Indian Banking System can be segregated into
three distinct phases. Those are:-

• Early phase from 1786 to 1969 of Indian Banks.

• Nationalizations of Indian Banks and up to 1991 prior to Indian banking sector Reforms.
• New phase of Indian Banking System with the advent of Indian Financial & Banking Sector
Reforms after 1991.

Nature of Exports, Imports by Destination:

Exports:
INDIA’S EXPORTS OF PRINCIPAL COMMODITIES
 Commodity Group US $ million Percentage
Variation
April-March Apr-Feb April-March
2006-07 2007-08 R 2008-09 P 2006- 2007-
07 08
1 7 8 9 10 11
I. Primary Products 19,686.0 27,523.4 23,210.8 20.2 39.8
(15.6) (16.9) (14.8)
A. Agricultural & Allied Products 12,683.5 18,403.6 15,968.5 24.2 45.1
(10.0) (11.3) (10.2)
II. Manufactured Goods 84,920.6 1,02,943.5 1,00,909.1 17.0 21.2
(67.2) (63.1) (64.2)
A. Leather & Manufactures 3,016.7 3,502.5 3,298.0 11.8 16.1
B. Chemicals & Related Products 17,335.5 21,176.7 20,532.6 17.4 22.2
C Engineering Goods 29,567.2 37,352.8 40,701.7 36.1 26.3
.
D Textiles and Textile Products 17,373.2 19,420.1 17,689.5 5.9 11.8
.
E. Gems and Jewellery 15,977.0 19,678.7 17,193.5 2.9 23.2
F. Handicrafts 438.0 508.2 279.7 -5.2 16.0
III. Petroleum, Crude & Products 18,634.6 26,903.8 25,407.2 60.1 44.4
(14.7) (16.5) (16.2)
IV. Others 3,172.9 5,761.4 7,660.6 26.4 81.6
(2.5) (3.5) (4.9)
Total Exports ( I+II+III+IV ) 1,26,414.1 1,63,132.1 1,57,187.8 22.6 29.0
R : Revised. P : Provisional.
Note : 1. Figures in brackets represent percentage to total exports.
2. Leather & manufactures include finished leather, leather goods, leather garments, footwear of leather
& its components and saddlery & harness.
3. Engineering goods comprise ferro alloys, aluminium other than products, non-ferrous metal,
manufactures of metals, machine tools, machinery and equipments, transport equipments, residual
engineering items, iron and steel bar/rod, etc., primary and semi-finished iron and steel, electronic
goods, computer software and project goods.

4. Textiles and Textile Products includes: (a) cotton yarn, fabrics, made-ups, etc., (b) natural silk yarn,
fabrics made-ups, etc., (c) manmade yarn, fabrics, made-ups, etc., (d) manmade staple fibre, (e) woolen
yarn, fabrics, made-ups, etc., (f) readymade garments, (g) jute & jute manufactures, (h) coir & coir
manufactures and (i) carpets.
Source : DGCI& S.

Imports:
Magnitude and trends of economic and social indicators:
Geographical Indicators:

Country India

Capital Delhi

Population 1.154 Billion 2009

Population (Avg. Growth Rate) 1.405% 2009

Source:
Economic Survey

Economic Trends and Indicators:

Economic Indicators Units 2004-05 2005-06 2006-07 2007-08 2008-09

GDP (Constant Market Prices) Rs. Crore 2602065 2844942 3120029 3402716 3609425

Growth of GDP (Constant Prices) % 7.5 9.5 9.7 9.0 6.7

Saving Rate (constant Prices) % of 31.7 34.2 35.7 37.7 n.a.

GDP

Gross Domestic Capital Formation % of 32.1 35.5 36.9 39.1 n.a.

GDP

GNI (PPP) US $ (b) 2472.39 2746.19 3082.57 3374.89 n.a.

GNI per Capita US $ 730 820 950 1070 n.a.

Exports US $ (m) 83535 103092 126361 162904 168704

Imports US $ (m) 111516 149167 185749 251439 287759

Inflation (WPI) (52-week average) %Change 6.5 4.4 5.4 4.7 8.4

Foreign exchange reserves US $ (b) 141.5 151.6 199.2 309.7 252.0

Unemployment Rate % 9.2 8.9 7.8 7.2 6.80

n.a. = not available Source: Economic Survey

(m) = million World Bank
(b) = billion Indexmundi.com

Social Indicators:

Social Indicators 2004-05 2005-06 2006-07 2007-08 2008-09

Population (Million) 1089 1106 1122 1138 1154

 Birth Rate (Per 1000) 23.8 23.5 23.1 na na

Death Rate (Per 1000) 7.6 7.5 7.4 na na

Life Expectancy at birth (in Years) na 64.1 63.5 na na

a) Male na na 62.6 na na

b) Female na na 64.2 na na

Education: Literacy rate (%) na 67.6 na na na

a) Male na na na na na

b) Female na na na na na

Mortality rate under-5 (per 1,000) 77 na 72 na na

Poverty % of population 27.5 25

HDI 0.609 0.612

Total Fertility Rate (TFR)(Per women) 2.8

Infant Mortality Rate (IMR)(Per 1000 live births) 55

n.a. = not available Source: Economic Survey

World Bank

Application of growth and development theories

Rostow- Stages of Growth:

According to Rostow stages of growth, India falls in the “Take-off” stage owing to the following reasons:

• In 2008, the industrial sector of India contributed 29.1% to its total GDP whereas agriculture
contributed 17.2%. According to Moody’s (the rating agency) the industrial sector of India will
continue to grow in coming months.
• There is increase in savings and investments of India. In 2009, the savings and investments ratio
to GDP stood at 37.7% and 39.1% respectively.
• According to Rostow, investment should be at least 10% of GDP whereas India has 39.1% of
investment to GDP.
• In 2003, the labor force employed in agriculture sector was 60% and in 2009, it reaches to 52%
which shows decline of 13.34%.

Lewis Model:

In 1990-91, the contribution of agriculture, industrial & service sector was 32%, 27% & 41%
respectively. In 2005-2006, the contribution of agriculture, industrial and service sector was 20%, 26% &
54% whereas the contribution of three main sectors in 2007-2008 was 17%, 29% and 54% respectively.
This shows a decline in the production of agriculture sector and rise in industrial sector. In 2003, labor
force employed in agriculture, industrial & service sector was 60%, 12% & 28% and in 2009 the labor
force in agriculture sector shrank to 52%. Decline of labor force in agriculture sector is showing that the
labor is moving from agriculture sector to industrial sector as Lewis Model states. According to Lewis,
the movement of labor from traditional sector to urban sector would not hamper the productivity of
agriculture sector but in India the productivity of agriculture sector is keep declining because of two
reasons 1) realistically movement of labor from agriculture to industrial sector during peak seasons (i.e.
kharif & Rabi) hamper the productivity 2) Indian government is neglecting the agriculture sector. The
productivity of industrial sector and contribution of this sector to GDP is increasing because the area
under the agriculture sector is being utilized by industrial sector and the government of India is paying
more attention towards industrialization and for this reason the more resource is given to industrial sector.

H-D Model:

HD model is not applicable at Indian economy because the incremental capital/output ratio (ICOR) is
higher than other countries which show that additional capital is not efficiently used. Instead of using
capital output ratio (COR) we should use ICOR, that measure the productivity of additional capital rather
than the entire capital stock. The reason of high ICOR in Indian economy is that they choose large
projects instead of small ones and large projects have high ICORs. Large projects require large doses of
capital. Another reason of high ICOR is low productivity due to inefficiency. As we know the completion
brings/create efficiency, India lacks in completion. So the promise of higher growth rate that we got from
Harrod-Domar model never materialized.

The Neoclassical Counterrevolution:

According to our finding India falls into market-friendly approach owing that government has built the
infrastructure required by the industry and made massive investment to provide the much-needed
facilities of power, communications and roads for private enterprises. A good number of institutions were
promoted to help entrepreneurship development.

SOLOW Model:

India is the second largest country in terms of population. The population growth during 1951-61 was
averaged 2.1% which increased to averaged 2.5% in 1971-81 afterwards the population growth is
declining and in 2008-09 it reached to 1.41%. The savings to GDP on the other hand from the 1951 is
increasing and during 1951-61 it was 8.6% which dive to 23.7% in 2000-01 afterwards the savings to
GDP increased robustly and in 2009-09 it stood at 37.7%. If we look at the average annual labor
productivity growth rate in India it was 4 percent during 1991-95 which then jumped to 5.5% during the
period of 2000-2005. According to above findings, India economy falls into the Capital-deepening and in
coming years Indian economy has an opportunity to increase the labor productivity growth thus
increasing economic growth.

Unbalance Growth Theory:

India is developing country and scarce in capital, that’s why unbalanced growth theory is applicable in the
Indian economy. Indian economy is moving from agriculture sector to the industrial sector from 1951.
Industrial sector is growing more quickly than the agriculture sector; Indian government is giving more
attention toward industrial sector because it provides economic growth and also helping other sectors
through linkages. For example, Tractor Manufacturer Company like Mahindra & Mahindra takes raw
material like steel from the local steel manufacturer (Mittal Steel), and the finish good (tractor) is transfer
to the agriculture sector which helps the agriculture sector to increase their production. In India, though
there has been some improvement in infrastructure development in transport, communication & energy
sectors in recent years, there are still significant gaps that need to be bridged. The chemical and auto
industry have deep backward and forward linkages with several key segments of the economy.

Conclusion and implications: