India

One of the fastest growing of the world's major economies, India witnessed rapid transformation from a socialist economy of the post-independence era to a globalized one from the 1990s. With a population of about 1.1 billion (July 2006 estimate), it is the second most populous nation of the world, and the seventh largest nation in land area, covering 3,287,590 sq. km, stretching from the Bay of Bengal in the east to the Arabian Sea in the west.

It was Prime Minister Jawaharlal Nehru (1889–1964) who formulated most of India's post-independence policy. A planning commission was set up in 1950 with him as chairperson to modernize large sectors of economy. Increase in agricultural productivity and industrialization within the framework of a socialist pattern of society was emphasized. The mixed pattern of economy saw private ownership of agriculture and industrial firms. Manufacturing, railways, aviation, electricity, communication, infrastructural activities and more were under state control. About four decades of a socialist economy with centralized planning brought about economic woes in various sectors.

The Nehru model slowed down the economy and hampered business acumen due to the prevailing License Raj, or control system. There were innumerable hurdles for private enterprise, and foreign direct investment (FDI) was abhorred by Indian think tanks. In the three decades after independence, the annual economic growth was about 1 percent per capita. The growth of industry was 4.5 percent a year. The centralized planning put a damper on productivity and profitability of industries. The trade deficits increased. Import was not encouraged with all the tariffs and controls. India played a negligible role in world trade. It was high time for Indian policy makers to abandon the decades-old centralized planning model and join the mainstream of globalization with a market-driven economy.

Reform

During the premiership of Rajiv Gandhi (1944–1991), India moved toward economic reforms with far-reaching results pertaining to India's economy and business. During the congress ministry of P. V. Nar-asimha Rao (1921–2004) with the present premier Manmohan Singh (1932-) in charge of finances, economic reforms accelerated. These formed a watershed in the history of independent India, and their impact was felt in politics, society, and the economy. Privatization encouraged business. Private enterprise, both indigenous and foreign, began to play an important role. State control and public sectors ceased to be important actors in Indian business. A liberalization policy did away with the rigid license system, making starting a business comparatively easier. Import substitution was not emphasized and exports were encouraged. Multinational corporations (MNCs) began to invest in the Indian market.

India shifted to a market-driven economy from its decades-old centralized planning model and joined the mainstream of globalization at the international level. India marched ahead with business process outsourcing (BPO), and Indian technical personnel were sought after in information technology (IT) globally. Indian companies went on a corporation-buying spree on a worldwide basis.

India surged ahead in the Human Development Index (HDI) as a country in the category of medium human development. Per the report of the United Nations Development Programme for 2007–08, its rank was 128, with an HDI value of 0.619 in 2005. The HDI value was only 0.419 in 1975. With a population of more than 1.1 billion, India is expected to take its place in the global economy in the future. Despite 29 percent of its people living below the poverty line, India has become the world's fifth-largest economy in terms of purchasing parity. India became the world's fourth-largest foreign currency holder in January 2008 with a $285 billion reserve. With a gross national product (GNP) of $450 billion, the country has become a leading player in the global economy. The gross domestic product (GDP) in 2006 was $911.8 billion, with growth of 9.2 percent.

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