country briefing: India – economy

by admin on September 1, 2010

India Country Briefing
Section I: Economy and Business Climate

I.                   Demography & Geography

India is the world’s second most populous country with an estimated population of 1.2 billion. Within the last fifty years, the population has increased due to advancement in medicine and agricultural productivity due to India’s Green Revolution. From 1991 to 2001, India’s urban population increased by 31.2%. In 2001, more than 70% of India’s population resided in rural areas and there were 27 million-plus cities with the largest cities being Mumbai, Delhi, and Kolkata. India’s literacy rate is 64.8%, with 53.7% for females and 75.3% for males. India’s median age is 24.9, population growth rate of 1.38% per year. The Indian constitution recognizes 212 tribal groups, 7.5% of the population.

As of 2010, Hyderabad, city of Pearls, is the sixth most populous city in India covering 650 km2. Hyderabad is the financial, economic and political capital of the state Andra Pradesh. Hyderabad has developed into one of the major hubs for the information technology in India with biotechnology and pharmaceutical companies (USP, Novartis, Dr. Reddy’s Laboratories) due to the combination of the Public sector in Life Science Research and the Genome Valley, Fab City, Nano Technology Park also nicknamed “Cyberbad” and HITEC City. The city’s population has reached over 4 million in 2009 thereby being one of the most populated cities in India, with the population of the metropolitan area as above 6.3 million.

The Indian coast is 7,517 km long consisting of 43% sandy beaches, 11% rocky coasts, and 46% mudflats. Major rivers are the Ganges and Brahmaputra. Hyderabad is at 536 m above sea level with rocky terrain and hills. Climate during the month of March ranges from 20.3-35.2 C (68.5.4-95.4F).[1]

II.                 Broad Economic Indicators

With GDP at US$1.4 trillion, India represents the 11th largest economy in the world and third largest in Asia.  India’s economy is the 4th largest in the world at $3.6 trillion, with purchasing power parity (PPP) taken into account.  Per capita GDP (nominal) is US$1,124, and 37% of the population lives below the poverty line.  India’s economy stands out for its growth rate, with IMF projections for annual real GDP growth at 9.7% and 8.4% for 2010 and 2011, respectively.  In comparison, IMF projections for annual real world GDP growth are 4.8% and 4.2% for the same time period.

IMF Projections for Annual Real GDP Growth for 2010, 2011[2]

2010 2011
Advanced Economies 2.7% 2.2%
United States 2.6% 2.3%
Emerging and Developing Economies 7.1% 6.4%
India 9.7% 8.4%
China 10.5% 9.6%

With a work force of 478 million, India is the second largest labor force in the world. The unemployment rate is at 9.4%, with 10.1% in rural and 7.3% in urban areas.  Among females, the unemployment rate is 14.6%, and for males, the rate is 8%.

In a recent article published in the IMF’s Finance & Development[3], Arvind Panagariya describes how Indian labor laws have hindered the shift of the national labor force from agriculture to industry, adversely affecting the potential for economic growth to alleviate poverty.  By occupation, the majority of the labor force still works in agriculture (52%), with industry and services employing 14% and 34%, respectively.  India has a long history of limiting the production of labor-intensive products, including apparel, footwear and toys, to enterprises with an investment ceiling of approximately $100,000 (later $250,000). This practice prevented small, fragmented players in labor-intensive industries from gaining the scale necessary to compete globally.  While this practice has nearly been eliminated, according to Panagariya, strict labor laws still prevent the entry of large-scale manufacturing firms in these industries.

Instead, growth in India has been led by capital- and skilled-labor-intensive sectors, such as automobiles, auto parts, petroleum refining, steel, information technology, and pharmaceuticals.  Services account for 55.3% of GDP, with industry and agriculture contributing 28.6% and 16.1%, respectively. [4]

III.              Local Economy

Andra Pradesh has shifted successfully to leading capital- and skilled-labor-intensive sectors.  Major agriculture products include rice, wheat, oilseed, cotton, jute, tea, sugarcane, potatoes. Major industries are textiles, telecommunications, chemicals, food processing, steel, transport equipment, cement, mining, petroleum, machinery, and software. Major exports are petroleum products, textile goods, gems and jewelry, software, engineering deliverables, chemicals, and leather.  Major imports include: oil, machinery, gems, fertilizer, and chemicals.

In 2008, Hyderabad ranked 93rd in the Lists of Richest Cities in the world by GDP (PPP) with US$60 billion and the 4th in India with a 29.55% workforce participation. Hyderabad is ranked as the 2nd best Indian city for doing business. Indian School of Business, ranked 12 in global MBA rankings. There has been a shift from a primarily service-oriented city in the 1990s to being one with more diversified spectrum including trade, transport, commerce, storage, and communication. Service is still a dominant entity with 90% of the workforce contributing towards the field. With the economic boom, Hyderabad has seen an increase in retail and real estate business. Development of technological infrastructure allowed Hyderabad to become a epicenter of IT industry with several multinational corporations such as Microsoft and Oracle.[5]

IV.              Regulatory Environment

Regulation of the Indian economy is generally unpredictable and a hurdle to doing business.  India as a country scores in the bottom 10% for key indicators including contract enforcement, respect of intellectual property law, tax payment, and government bureaucracy.[6] Due to its status as a key hub for technological development, Andra Pradesh performs well on these metrics relative to the rest of India.  Government bureaucracy is often cited as a major impediment to growth.  Recently, a major consulting firm ranked India as the most over-regulated Asian nation.[7] Land use disputes often delay construction projects for years.[8]

The ubiquity of governmental regulation also appears in the healthcare space.  As an example, a majority of India hospitals were founded with some government assistance and the assurance that some portion, typically 25%, of the hospital capacity be dedicated to serving the very poor.  A whole industry has sprung up around defining what this relatively vague requirement means in the context of complicated hospital care environments.[9] Ironically, in the medical device sector there are actually voices calling for an increase in governmental regulation.  Medical devices, including stents, catheters, and other more specialized equipment, are highly regulated in the United States.  However, they can be made and sold with relative freedom in India.  It was only a few years ago that the Indian government assigned an agency to review and approve new devices.[10]

V.                 Implications for Healthcare Delivery

India’s economic climate has led to a series of public health issues.  Rapid growth has fueled both a middle class and a significant “upper-middle class”, increasing the demand for services beyond basic primary care.  Wealthy urban populations have seen a shift from acute tropical disease to chronic illnesses, including diabetes and heart failure, stimulating investment in these services.  Over the last several years, India’s broad manufacturing capabilities have led to “indigenization” of various medical technologies among local manufacturers.

In contrast to the cities, rural areas have not seen this shift to a more Western healthcare environment.  Due to disparities in wealth and the challenge of delivering care to rural settings, rural Indians make up roughly 70% of the entire population, but receive 30% of the healthcare spending.  There is a corresponding disparity in rates of infectious disease, infant mortality, and early death.[11]


[1] Source: travel-india.blogspot.com

[2] Source: World Economic Outlook, October 2010

[3] (Sept. 2010)

[4] Source: CIA World Factbook 2009

[5] Source: “Hyderabad’s economy in a shambles” The Times of India.

[6] Source: World Bank Group Report “Doing Business 2011”

[7] Source: http://www.2point6billion.com/news/2011/01/27/india-and-china-top-regulatory-overkill-list-8451.html

[8] Source: The Economist “Infra Red: India’s ambitious development plans hinge on attracting private capital” 2010.

[9] Source: http://www.expresshealthcare.in/200805/awards02.shtml

[10] Source: http://www.expresshealthcare.in/200808/medicall04.shtml

[11] Source: http://www.sas.upenn.edu/~dludden/WaterborneDisease3.pdf

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