India is one of the fastest emerging economies in the world. Indian economy is world's 11th and Asia's third largest economy in terms of Gross Domestic Product (GDP). In terms of Purchasing Power Parity (PPP), Indian economy stands fourth in the world. India has a huge untapped consumer market with over one billion people.
Till 1990, Indian economy was handicapped by government control. The license regime of Indian Government made companies to seek permission from bureaucrats to open, close, and even expand their business. Exports were limited to only few countries of the former Soviet Union. Due to high import duties, many Western companies showed little interest in investing in India. Foreign Direct Investment (FDI) in the 1980s was a mere $100 mn per anum. India's GDP growth rate in the 1970s and early 1980s were a mere 3.5%.
Indian economy has undergone a turnaround after the liberalization in 1991. Liberalization turned Indian economy into an outward looking, dynamic and global one. The turnaround of Indian economy was achieved by implementing few macroeconomics measures like curtailing wasteful government spending, slashing tariffs and excise duties, easing FDI rules and regulations and overhauling the financial system. The effect of liberalization are visible in the Indian economy. The annual inflation has come down to 5.4% in FY 2002 from a high of 17% in 1991; despite the revenue shortfall from lower tariffs the budget deficit of total GDP fell to 5.6% in FY 2002 from 8.4% in FY 1990, and the estimated growth rate of GDP is above 6% for the FY 2003.
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