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Overview of Indian Economy

Indian Economy in Comparison to Major Economies of the World

India is regarded as one of the largest economies in the world and is growing at a steady pace. In today’s article, we will compare the Indian economy with the other major economies in the world.

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Comparing the Indian Economy with the largest economies in the world

For the sake of the comparison, we will focus on the per-capita income, population growth, the composition of the population, human development, R&D, equity flows, merchandise trade, and GDP shares of different countries.

largest economies in the world

                                                                                                                                             Source: Pixabay

Per Capita Income

In 2014, the per capita income of an Indian was $1,560. This grew to $1,600 in 2015. Here is a quick comparison table:

largest economies in the world

As you can see in the table above, in both the years, India’s per capita GNI was lower than other major economies like the USA, UK, Japan, Germany, and China. Further, in 2015, the per capita GNI of USA was around 35 times that of India. On the other hand, the purchasing power parity rates of the USA was only 10 times that of India.

In simple words, the official exchange rates showed an exaggerated disparity between the economies while the purchasing power parity figures balanced them. Having said this, the difference between the standard of living of an average American and Indian is large and significant.

If we talk about China, in 2015, the average per capita GNI of China was around 5 times higher than India. Also, the purchasing power parity figures were twice those of India. However, there is a notable difference in the standard of living of an average Chinese and Indian citizen.

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Population Growth

In 1980, the population of the world was around 4,426 million which grew to around 6,893 million by 2010. The annual compound growth rate of population was 1.7 percent in 1980-81 which dropped to around 1.15 percent in 2009-10. Further, population growth rates are different in different parts of the world.

largest economies in the world

From the table above, it is obvious that the low-income economies and the middle-income economies account for around 84 percent of the world’s population.

Also, during the period from 2000-09, the growth rate in low-income economies was higher than the middle-income economies. Further, China’s population growth rates declined to 0.5 percent during 200-09, while India recorded a population growth of 1.38 percent.

Sex Composition of the population

largest economies in the world

From the table above we can see that the average sex ration has dropped from 986 in 2001 to 982 females per 1,000 males in 2015. Out of the 6 countries shown above, Brazil is the only country which experienced an increase in the ratio from 1,025 to 1,034.

In India, the sex ratio was 934 in 1981 and had dropped to 929 in 1991. In 2001, India had a sex ratio of 933 which increased to 940 in 2011. However, it declined in 2015 to 929 females per 1,000 males. The USA, on the other hand, has more than a thousand females per 1,000 males.

Human Development

The United Nations Development Program (UNDP), ranks countries based on their Human Development Index or HDI. The HDI takes into consideration the life expectancy, educational attainment, and per capita income.

It is also an alternative indicator of the socio-economic development of a country. According to the Human Development Report (HDR), India ranks 130 out of 188 countries.

India’s HDI of 0.609 is below the average of countries in the medium human development group (of 0.630). However, it is marginally higher than the HDI average of the South Asian countries (0.607).

During the period between 1980 and 2014, India’s per capita GNI increased by about 338 percent. Also, over the same period, the Life Expectancy at Birth (LEB) increased by 14.1 years. Further, the mean years of schooling increased by 3.5 years and the expected years of schooling by 5.3 years.

largest economies in the world

As you can see in the table above, India has the least mean years of schooling as compared to the other BRICS nations. Also, India’s LEB is lower than Brazil, China, and Russia but higher than South Africa. Further, Bangladesh has a much lower per capita GNI but a higher LEB than India.

The HDR also provides information on the Gender Development Index (GDI) along with the HDI for all 188 countries. In India, the HDI value for females was 0.525 in 2014.

largest economies in the world

All other countries (except Pakistan) have higher HDI values for females in comparison with India. This implies that the average years of schooling in India of 3.6 years is substantially lower than the males.

Research and Development

In 2012-13, the R&D sector in India experienced a 20.8 percent growth and contributed around 1.4 percent of the GDP. This was according to the Central Statistical Organization’s (CSO) old method. As per the CSO’s new method, there is no separate head for R&D.

It is a part of the professional scientific and technical activities which grew at 3.8 percent and 25.5 percent in 2013-14 and 2014-15 respectively. According to the Global Competitiveness Report, 2015-16, India’s capacity for innovation is lower than many countries.

largest economies in the world

India also scores lower than China and South Africa in the quality of scientific research institutions. This is also evident in the poor university-industry collaboration scores in R&D as compared to other BRIC countries like China and South Africa.

India also fares badly in terms of patents granted per million population. The only place where India scores better is the availability of engineers and scientists.

Equity Flows

Equity flows comprise portfolio equity and foreign direct investment (FDI). Most countries prefer FDI flows since they are beneficial for exports and are non-debt creating.

A better business regulatory environment, growth prospects, and expanding domestic markets tend to attract many investors. According to the World Development Indicators, 2015, FDI flows into Brazil, India, and China accounted for more than half of the global FDI flow.

In 2014, India’s FDI flow was around $ 33,871 million, while China and the USA received 9 and 4 times the amount respectively.

In 2014, the global equity flows to high-income economies increased by 42 percent while those to the middle-income economies increased by 27 percent. Many investors sought after emerging markets, but the general portfolio equity flows were concentrated in a handful of middle-income countries.

Merchandise Trade

In 2014, India’s merchandise trade was 38.3 percent of the GDP. It is higher than the USA (23.2 percent of the GDP) but lower than that of Germany (70.4 percent of the GDP) and China (41.5 percent of the GDP).

Further, in India, the major contributor to exports is from services and not merchandise. The services sector is the most vibrant sector in India.

largest economies in the world

GDP Shares in selected countries

largest economies in the world

The table above provides information regarding shares in GDP of agriculture, industry, manufacturing, and services. the data reveals a wide variation in the output pattern across different countries. In a developed country like the USA, agriculture contributed to just 1 percent of GDP in 2000 and 2015.

Also, during the same years, the services sector contributed around 76 percent in 2000 and 78 percent in 2015 to the GDP. In fact, if we look closely, all developed countries have services as the major contributor to the GDP. The industry and manufacturing sector follow suit and the least contributing sector is agriculture.

In 2015, China’s services sector contributed 50 percent to its GDP. Further, in the same year, the share of the industrial, manufacturing, and agricultural sectors was 41, 30, and 9 percent respectively. India skipped the industrial phase and leaped directly to services.

Between 200 and 2015, the share of the services sector increased from 51 to 53 percent. For the same period, agriculture contribution decreased from 23 to 17 percent. While the industry’s contribution increased from 26 to 30 percent, the manufacturing sector’s contribution remained stagnant at around 16 percent.

Solved Question

Q1. In the year 2014, the HDI rank of India among BRICS countries was:

  • Lowest
  • Highest
  • In the Middle
  • None of the above


In 2014, India had the lowest HDI rank among BRICS countries.

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