India: Third Ranked World Economy

rev102_economia.jpgBy Rafael Pampillón published in IDEAS, IE Business School alumni magazine

After Vietnam, India is the world economy that will enjoy the highest growth, with a forecasted yearly average growth rate of 8.5%.

Almost everyone agrees that the country in the starring role during the first half of the 21st century is China. But no one has any doubt that the second half of the 21st century will also feature India as a protagonist. The largest populations in the world â?? for some years now both countries have been implementing reforms enabling change of their economic model, from high-intervention to market economies. These reforms have consisted of ambitious economic policy strategies that have meant greater internal deregulation, and opening to the exterior, that have produced high economic growth rates. This growth process has been accompanied by reductions in poverty levels in both China and India, although, unfortunately, social and regional inequality has increased. All this means that the governments of both countries continue to prioritize the adoption of measures for maintaining or even increasing economic growth, to raise the populationâ??s level of per capita income, and to generate a higher level of wellbeing to allow sustainable development.Economic structure
As a consequence of the economic reforms, Indiaâ??s productive structure has undergone notable changes over the last 15 years. Transformations in the production system led the services sector in 2006 to generate 55% of the GDP, industry 27%, and agriculture 18% (see table 1). Services use 27% of the working population, and also represent the sector with the highest growth rate. In the Services sector as a whole, special mention must be made of the information and communications technologies (ICT) sector which is expanding in a sustained manner and growing at a yearly rate of 25%. The success of the ICT sector in India has had a significant impact on the countryâ??s economic productivity. The arrival of the digital age, and the new workforce with a high level of education and the ability to speak English, has gradually transformed the country into an important destination for international companies looking for technological support.