Economy in India

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India's diverse economy 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.

The UPA government has committed to furthering economic reforms and developing basic infrastructure to improve the lives of the rural poor and boost economic performance. 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 were 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. But 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.

In late December 2004, a major tsunami took at least 60,000 lives in India, caused massive destruction of property, and severely affected the fishing fleet.

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