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- Economy - overview:
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,
accounting for more than half of India's output with less than one
quarter of its labor force. About three-fifths of the work force is in
agriculture, leading the UPA government to articulate an economic reform
program that includes developing basic infrastructure to improve the
lives of the rural poor and boost economic performance. The government
has reduced controls on foreign trade and investment. Tariffs averaged
12.5% on non-agricultural items in 2006. Higher limits on foreign direct
investment were permitted in a few key sectors, such as
telecommunications. However, tariff spikes in sensitive categories,
including agriculture, and incremental progress on economic reforms
still hinder foreign access to India's vast and growing market.
Privatization of government-owned industries remained stalled in 2006,
and continues to generate political debate; populist pressure from
within the UPA government and from its Left Front allies continues to
restrain needed initiatives. The economy has posted an average growth
rate of more than 7% in the decade since 1996, reducing poverty by about
10 percentage points. India achieved 8.5% GDP growth in 2006,
significantly expanding manufacturing. 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.
Economic expansion has helped New Delhi continue to make progress in
reducing its federal fiscal deficit. However, strong growth - more than
8 percent growth in each of the last three years - combined with easy
consumer credit and a real estate boom is fueling inflation concerns.
The huge and growing population is the fundamental social, economic, and
environmental problem. CIA
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