In the past two decades, India has been making sustained progress on a scale, size and pace that is unprecedented in its own history. India is poised to cross the threshold to join the ranks of the world’s super power countries. The country has been successful on a number of fronts.

India has become one of the world’s fastest growing economies with an average growth rates of 9% over the past four years and has emerged as a global player in information technology, business process outsourcing, telecommunications, and pharmaceuticals.

Although India’s economy grew at 6.1% in the quarter ending June 2009 - among the highest growth rates in the world – this still represents a significant dip from the annual peak of 9.7% in 2006/07.

India is the world’s most populous democracy and one of Asia’s fastest-growing economies. Its 1991 “big bang” liberalization shed decades of cumbersome regulations and trade protectionism. Since then, the economy has grown rapidly, first in services and recently in manufacturing.

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 third of its labor force. Slightly more than half of the work force is in agriculture.

The economy has posted an average growth rate of more than 7% in the decade since 1997, reducing poverty by about 10 percentage points. India achieved 9.6% GDP growth in 2006, 9.0% in 2007, and 6.6% in 2008, significantly expanding manufactures through late 2008. India also 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. Strong growth combined with easy consumer credit, a real estate boom, and fast-rising commodity prices fueled inflation concerns from mid-2006 to August 2008. Rising tax revenues from better tax administration and economic expansion helped New Delhi make progress in reducing its fiscal deficit for three straight years before skyrocketing global commodity prices more than doubled the cost of government energy and fertilizer subsidies.

Job creation is likely to remain a key concern as new entrants to the labor force - relatively better educated and with higher aspirations - continue to put pressure on the job market.

Agricultural and rural sector:

Some two-thirds of India’s people depend on rural employment for a living. While the agriculture sector grew at only about 2.5% a year for a number of years, in recent years growth has touched 4.7% a year, facilitated by good monsoons, higher production of high-value crops, an increase in the minimum prices for grains, and the rise in global prices for agricultural products. Going ahead, it will be essential for India to build a productive, competitive, and diversified agricultural sector and facilitate rural, non-farm entrepreneurship.

Informal Sector Jobs:

While the services sector has been offering promising job opportunities for skilled workers, some 90% of India’s labor force remains trapped in low-productivity jobs in the informal sector. India’s labor regulations - among the most restrictive and complex in the world - have constrained the growth of the formal manufacturing sector, where these laws have their widest application. Better-designed labor regulations can attract more labor-intensive investment and create jobs for India’s unemployed and those trapped in poor quality jobs.

The window of opportunity must not be lost for improving the job prospects for the 80 million new entrants who are expected to join the work force over the next decade. The challenge will be to build enough safety nets for those losing their jobs in the informal sector, especially in urban and peri-urban areas hardest hit by the slowdown, while creating the space for the enhancement of skills.

Equally important is the building of skills among India’s rapidly rising work force, whose ranks are joined by some 8-9 million new entrants each year.

Improving Infrastructure:

India’s rapidly growing economy has been placing huge demands on power supply, roads, railways, ports and transportation systems. But, infrastructure bottlenecks have been eroding the country’s competitiveness. Increases in power generation fell short of target; when the economy was growing at a rapid 8% a year, power supply grew at only 4%. And, although the national highway network doubled in size between 1997 and 2007 – almost 35,000 kms were added during this period – soaring demand has far outstripped supply. Urban infrastructure is a severe constraint to the expansion of key centers of growth, while weaknesses in basic rural infrastructure—from roads to electrification—have constrained the growth of the rural economy.

Power:

India build its largest hydropower plant at Nathpa Jhakri in Himachal Pradesh. Now helping the country augment the supply of hydropower are projects such as the 412 MW run-of-the-river Rampur Hydropower plant on the Satluj river in Himachal Pradesh. Other hydropower projects that are in the works; a 444 MW project on the Alakananda river in Chamoli district in Uttarakhand, and the other at Luhri, further downstream from Rampur in Himachal Pradesh.

Transport:

In the transport sector, Andhra Pradesh is upgrading its state highways. Upgrade of rail and road connectivity in Mumbai; improvement of state highways in Andhra Pradesh, Himachal Pradesh, Kerala, Orissa, Punjab and Uttar Pradesh; upgrade of rural roads in select districts of Himachal Pradesh, Rajasthan, Jharkhand and Uttar Pradesh.

Urban Development:

India’s frenetically growing cities and towns face major challenges in creating adequate infrastructure including in the transportation, communications, solid waste, water, and power sectors. It is necessary to streamline urban transport in Mumbai and improve the delivery of urban civic services in Tamil Nadu and Karnataka. to provide continuous, reliable water supply in three urban areas in Karnataka.

Addressing Issues for Longer-Term Sustainability:

High levels of population density and poverty, stressed ecological systems, and a substantial dependence on natural resources have made much of India’s population very vulnerable to climate change. The following areas will thus require long-term vision and urgent action:

Adapting to climate change:

Improving energy efficiency and ensuring adequate energy supplies. Coping with accelerating urbanization through strengthened urban governance. Protecting India’s fragile environment in the face of the rising pressures created by economic success,
climate change could impact India more than most other countries. Its impact will most likely be felt first and foremost in the water sector. An Integrated Coastal Zone Management Project that seeks to protect India's coastal areas while also ensuring the livelihoods of the people living along the coastline is in the pipeline.

Supporting India in its efforts to increase the generation of clean energy. helping the country to tap the hydropower resources in the Himalayan region, as well as supporting the rehabilitation of old and inefficient coal-fired power plants so that they produce more energy with the same amount of fuel, reducing their carbon emissions. helping to strengthen power transmission networks to ensure that the power produced reaches consumers efficiently and losses in transmission are reduced. promoting energy efficiency in various sectors (in small and medium enterprise, chillers, etc.) are projects in the pipeline.