This is an image of the new Indian Rupee symbol which resembles the right side of the letter "R" with and equal sign across the top.

Indian Rupee Symbol

India is the world’s second largest country by population (1.2B vs. China’s 1.4B).  Its population is forecast to grow to 1.5 B by 2030 and to 1.7 B by 2050.  Its economy has been catching up to its potential, as the world’s 10th largest, at $1.2 T (International Herald Tribune (IHT), 1-28-10).

Demographics Drive Economics in India

Demographics will mean everything for India in the next 40 years.  Half of the population is younger than 25.  “This demographic dividend is one reason some economists predict that India could surpass China in economic growth rates within 5 years” (8/28/10 IHT).  The International Labor Organization has stated India will account for the highest working age population in the next 10 years.  Of G-20 nations, 64% of the increase in population between 15-64 years will occur in India alone! (India Economic Times 11-27-10). In 2010 the working age population stands at 674 million but will rise to 793 million by 2022.  According to Centum, in 2020, the world will have a deficit of 47 million workers.  India will have a surplus of 56 million (11-27-10 Economic Times).

Females are Aborted

As far as demographics are concerned, India now averages 2.6 children per family, and is implementing incentives to delay childbirth.  The population is skewed toward males.  The British medical journal Lancet reported in 2006 that over the past 20 years, there have been 10 million missing female births in India ( 9-3-10 IHT).  Illegal prenatal sex determination tests allow Indians to choose boys, who earn more and are expected to provide for aging parents.  Girls cost extra to marry, for dowry, etc.  In some parts of India, like N. Punjab, only 800 girls are born for every 1,000 boys.

The World Economic Forum’s report on global sex discrimination ranks India 114th of 134 nations rated.  Indian women earn only 33% of men’s wages.  Only 54% are literate, vs. 75% for men. (4-28-10 IHT)  The government just announced an investment scheme for seeds, water, credit and subsidies to assist women in agriculture.  Farming employs 80% of all economically active women (Asian Age 11-29-10).


Agriculture used to employ most Indians.  Over 70% of the nation still lives in the countryside but the land’s fertility has been declining.  Around 8 million people left farming 1991-2001, when the last Indian census was conducted (1-29-10 IHT).  Agriculture represented 30% of GDP in 1990 (7-2-10 IHT) and now accounts for 17.5%  India has more agricultural land than China (182 million hectares – independent estimates place it at only 170 mh. vs China 135 million hectares.  China produced 112 million tons of wheat but India managed only 78.6 mt in 2008 (UN Food/Ag Organization – Economic Times 11-27-10).

India is setting up training institutes to train 240 million people by 2022.  Farming is still India’s first economic activity, employing 600,000.  The garment industry is second largest employer, but only 1% of GDP (10-28-10 IHT).  Construction is India’s third largest employer (33 million workers).  .  Industry has declined from 30% to 20%.  An increasing share of India’s economy since market-oriented reforms in 1991 has been the growth of services. Services (banking, insurance, communications, real estate) in 1990 stood at 44.7% and in 2009 reached 62.6% if GDP (7-2-10 IHT).


Trade in goods between India and the US grew from 1991 $5B to $38B in 2009.  The US is now India’s second largest source of direct foreign investment.  (9-24-10 IHT).  FDI cumulated since 1992 is $140B (1-24-10 IHT).  Indians talk about a “common mind set and shared commitment to democracy and capitalism.  A 2005 Pew Research Center survey found 71% had a favorable view of the US, the highest outside of the US itself.  81% of Indians considered Americans hard working and 86% admired Americans for being inventive.  These feelings are a result of thousands of business transactions at the grass roots level between individual citizens.

Inflation and Growth

India’s economy is growing at 8-9% per year.  Inflation is at 11%, more for foodstuffs.


After tourism fell markedly from the global economic crisis of 2008, arrivals have increased in 2010.  Although government indicates 5.11 million in 2009, we have learned that this number overstates those who actually tour India (roughly 4 million annually).  Many enter India only to fly to Nepal.  They’re counted again when they fly to Delhi to return home.  Forex earnings rose 8.3% to $12B in 2009.

Middle Class – Consumption

India’s growth is being driven by consumer durables like TVs and refrigerators, as well as annual long-term capital investment, forecast at $134B.  It has galloping automotive markets.  A $300M announcement by GM last week that they will develop 6 new models to be made in India and Toyota’s chairman announcing investment in electric vehicles are just two examples of the companies involved in growing India’s auto industry.

India’s middle class has grown to 258 million people in the past decade (12-6-05 IHT).  Consumption is rushing ahead.  The National Payment Corp of India is implementing a way of making payments by cell phone.  Only 300 million people have bank accounts here, but 600 million have a cell phone.  This is growing 15-20 million per month.  22 banks are expected to participate (Times of India 11-24-10.)

Corruption Poisons India

The Hindustan Times on Saturday, Nov. 20 ran a piece highlighting the findings of a study of India’s economy from 1948 to 2008.  It found that high net worth individuals illicitly took out of India’s economy $462 billion US.  Nearly half of this occurred since liberalization of the economy since 1991.  Ways in which this was done include under or over invoicing trade, and other corruption.

The author of the report, Global Financial Integrity, a U.S. think tank, put this into context.  The huge loss of capital, if it were retained, could have liquidated all of India’s external debt totally $231 billion and provided another half for poverty alleviation and economic development.  They estimate that the outflows have set back India’s development by 5% of GDP every year.  India currently has a per capita income of only $1,000, while if the capital had remained here, it would have been $6,000!, according to Arun Kumar, Professor of Economics at Jawaharlal Nehru University.

Dev Kar, the author of the report, which was titled ‘The Drivers and Dynamics of Illicit Financial Flows from India: 1948-2008″ estimates that the size of the underground economy in India to be around $640 billion, or half of India’s GDP (2008).

The loss of capital grew 9% annually between 1948 and 1990.  Then after 1991, it almost doubled to 16.4%.

Although India’s economy is booming, most Indians aren’t benefiting.  Only the middle class is becoming trained and educated.  One billion Indians live in poverty.  Education is the major need, particularly for women.  Unless and until India begins to use the 50% of funds lost to corruption and non-payment of taxes, it will not adequately compete with its neighbor, China.

Claudia and Gail

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