India's economy is the twelfth largest in the world in terms of market exchange rates. Since liberalization of the economy in 1991, the economy has progressed towards a market-based system from a regulated and protected one. The country became the second fastest growing economy in the world in 2008. India Economy GDP growth rate was 6.1% in 2009.
Gross Domestic Product (GDP) is the measure of a country's economic performance. It is the market value of all the goods and services produced in a year. GDP can be calculated in three ways namely through the product (or output) approach, expenditure approach and income approach. The product approach is the most direct one which calculates the total product output of each class.
The expenditure approach calculates the total value of the products bought by an individual which should be equal to the expenditure of the things bought. The expenditure approach calculates the sum of all the producers' incomes where the incomes of the productive factors are equal to the value of their product.
In 2007, the Indian economy GDP crossed over a trillion dollar which made it one of the twelve trillion dollar economy countries in the world. There has been excellent progress in knowledge process services, information technology, and high end services. But the economic growth has been sector and location specific.
The trend for India's GDP growth rate are given below
1960-1980 - 3.5%
1980-1990 - 5.4%
1990-2000 - 4.4%
2000-2009 - 6.4%
Contribution of different sectors in GDP
Below are the contributions of different sectors in the India's GDP for 1990-1991
Agriculture: - 32%
Service Sector: - 41%
Industry: - 27%
Below are the contributions of different sectors in the India's GDP for 2005-2006
Agriculture: - 20%
Service Sector: - 54%
Industry: - 26%
Below are the contributions of different sectors in the India's GDP for 2007-2008
Agriculture: - 17%
Service Sector: - 54%
Industry: - 29%
The service sector contributes more than half of India's GDP. Earlier agriculture was the main contributor to the GDP. To improve the GDP and boost the economy, the government has taken various steps like implementation of FDI policies, SEZ's and NRI investments.
The GDP growth rate slowed down to 6.1% in 2009. In 2006, the country's trade contributed to around 24% of the GDP from 6% in 1985. According to Goldman Sachs, India's GDP in current prices may overtake France and Italy by 2020, Russia, Germany and UK by 2025 and Japan by 2035. It is also predicted that Indian economy will be the third largest after US and China by 2035.
In 2007, agriculture contributed around 16.6% of the GDP. Even though its share has been declining, agriculture plays a major role in the India's socio economic development. Industry contributes around 27.6% of the GDP (2007 est). The services sector contributed to 55% of the GDP in 2007. The IT industry contributed around 7% of the GDP in 2008 which was 4.8% in 2005-06. Remittances from overseas Indian migrants were around $27 billion or around 3% of the GDP of India's economy in 2006.