According to 2017 data from the International Monetary Fund (IMF), India is the world’s sixth-largest economy based on nominal gross domestic product (GDP), which evaluates market prices, and third-largest economy based on purchasing power parity (PPP), which compares the prices of like consumer goods among countries.
India is characterized as a developing mixed economy. With a population of some 1.3 billion, India is ranked 141st in the world based on nominal GDP per capita and 123rd based on GDP by PPP per capita. These measures divide nominal GDP and GDP by PPP by the country’s population.
What should I know about nominal GDP and PPP?Among the multiple ways that economists measure a country’s economic strength, nominal GDP and PPP are two of the most common.
Nominal GDP is based on official government estimates and depends on exchange rates between two countries, typically using the US dollar for one of the denominations. It’s useful for measuring financial flows between countries. But because it doesn’t consider differences in cost of living, it can distort per capita income estimates.
PPP, on the other hand, considers the relative cost of local goods, services and inflation rates — all factors considered to reflect a country’s domestic market. Because PPP compares the costs of a common “basket of goods” — some 3,000 consumer goods that include food, fuel and insurance — it’s considered a more ideal way to project per capita income projections and gauge poverty thresholds.
India’s official currency is the Indian rupee (INR). This currency has recently fluctuated between 60 and 70 INR against the US dollar.
Services accounted for 54% of India’s GDP in 2016, followed by industry and agriculture.
The services sector has enjoyed 9% annual growth since 2001. India generated $154 billion in revenues from IT, software and business process outsourcing services in 2017 alone.
In terms of industrial manufacturing, India was the sixth largest in the world in 2015. India’s automobile industry is also one of the world’s largest, producing some 21 million vehicles in 2013–2014.
The agriculture sector remains India’s largest employer. But its contribution to GDP has declined significantly in recent years, while the country’s services and industry sectors boomed.
Although India was the world’s third-largest electricity producer in 2015, it imports about 75% of its oil requirements. This is a major factor behind the country’s more than $14 billion trade deficit with other countries in December 2017.
The country comprises some 520 million workers. As of November 2016, unemployment is pegged at 5%. Although income inequality is relatively low compared with other countries, income disparities between urban and rural workers remain a problem.
Major contributors to the economy
India is a member of the World Trade Organization. China, the US, the United Arab Emirates, Saudi Arabia and Switzerland are among its top trading partners.
India’s top exports include gems and precious metals, oil, vehicles, machinery and pharmaceuticals. Its major imports include mineral fuels and oil, gems and precious metals, electrical machinery and equipment, computers and other machinery and organic chemicals.
India’s GDP growth has averaged 6% to 7% annually since 1991, and it became the world’s fastest growing major economy in 2015. The IMF forecasts that India will retain this distinction in 2018 and beyond. The country’s positive long-term economic outlook can be attributed to its young population, low dependency ratio, healthy savings and investment rates and increasing global integration.
Due to its recent economic progress, India’s seen significant gains in the fight against poverty in the last decade. The Indian government is taking steps to maintain high growth levels through flagship programs that foster job creation, particularly among women, and strengthen the agricultural sector. At the same time, it’s focused on maintaining the momentum of the services and industrial sectors. Generating and distributing power more efficiently is another challenge.