The economy of India is a diverse economy that encompasses traditional village farming, modern agriculture, handicrafts, a wide range of modern industries, and a multitude of services. Services are the major source of economic growth, though two-thirds of the workforce is in agriculture.
Government controls on foreign trade and investment have been reduced in some areas, but high tariffs (averaging 20% in 2004) and limits on foreign direct investment are still in place. The government has indicated it will do more to liberalize investment in civil aviation, telecom, and insurance sectors in the near term. Privatization of government-owned industries has proceeded slowly, and continues to generate political debate; continued social, political, and economic rigidities hold back needed initiatives. The economy has posted an excellent average growth rate of 6.8% since 1994, reducing poverty by about 10 percentage points. India is capitalizing on its large numbers of well-educated people skilled in the English language to become a major exporter of software services and software workers.
Despite strong growth, the World Bank and others worry about the combined state and federal budget deficit, running at approximately 9% of GDP. The huge and growing population is the fundamental social, economic, and environmental problem. Despite the growth rate, a quarter of the population cannot still afford adequate diet and there is uneven growth between urban and rural areas, particularly in infrastructure, employment and poverty.
With a GDP of 568 billion (B$) ($3.096 trillion (T$) at PPP) India has the world’s 12th largest economy (and the 4th largest when adjusted for PPP). However, the large population means that per capita income is quite low. In 2003 the World Bank ranked India 143rd in PPP per capita income and 160th in real terms, among 208 countries and territories.