Economy of South Asia

General Objective:

This course focuses on introducing the economic situation and development in South Asia , which is an important political and economic region in Asia .

In this course, South Asia countries’ (mainly India) culture ,tradition ,society and economy are analyzed. By learning this course, it is very important for us to get a better understanding about advantages and disadvantages , opportunities and challenges during economic development of South Asia.

Course Outline: 1 introduction: why we focus on South Asia? 2 A short introduction about countries in

South Asia 3 India: history, culture, religion and society 4 economy of India: overview 5 Economic Reforms and Growth Prospects

in India

6 Recent Macroeconomic Developments and Implications for Poverty and Employment in Pakistan

7 Complementarity of Trade and FDI Liberalization in Industrial Growth: Lessons from Sri Lanka

8 Recent Developments in the Bangladesh Economy

9 Software industry in India

10 Can India Overtake China?

Course Requirement: I. Class Participation 20% Three times of absence will degrade the final. II. Class performance 20% Ⅲ Term Paper 60% The term paper is required to hand in at the end of

the semester as the final and Late term paper will degrade the final.

Supplementary Reading List: 1 Edited by Uma Kapila: India’s Economy (since

Independence to 1996),Academic foundation ,Delhi,1996

2 Edited by Prema-Chandra Athukorala :The Economic Development of South Asia Volume Π, An Elgar Reference Collection, Cheltenham, UK· Northampton, MA,USA ,2002.

3 Parvez Hasan: Pakistan’s Economy at the Crossroads: past policies and present imperatives, Oxford University Press,Oxford New York Delhi 1998

4 Vijay Joshi, I.M.D. Little: India’s Economic Reforms(1991-2001), Clarendon Press, Oxford,1996.

5 Edited by Arif A Waqif: South Asian Cooperation in Industry, Energy and Technology, Sage Publications, New Dehil /Newbury Park/ London, 1987 .

6 Edited by Kalyan Banerji, Tavjani Vakil:India Joining the world Economy, TaTa Mcgraw-Hill Publishing company Limited, New Dehil ,1995.

7 Edited by Christophe Jaffrelot, Translated by Gillian Beaumount:A History of Pakistan and its Origins. Anthem Press,London,2002.

8 V.S.Naipaul: An Area of Darkness,1964; A Wounded Civilization,1977;A Million Mutinies Now,1990.

PART 1 Introduction: Why we focus on South Asia( Especially India)

According to people’s impression, South Asia is full of poverty and chaos. As for poverty, just in India there are 4 billion people below poverty line announced by the government. Nepal, Bangladesh and Bhutan are all least developed countries. As for chaos, not only dispute on Kashmir between India and Pakistan keep unresolved, but also so many blood conflict continued in India,

Pakistan ,Nepal and Sri Lanka. General speaking, South Asia is similar to Middle East in so many aspects: various religions, varies race, various culture, hostility among the people with the same clan ,boundary conflict left from colonial era and so on.

But all of these is changing in recent years.Firstly, the economic growth is fast.

According to the data of the World Bank, South Asia is the second fastest growing area with growth rate of 7% in 2004-2005 and only inferior to China with 9%.

About India In South Asia, India is attracting more and

more eyeballs.

Nonviolent resistance to British colonialism led to independence in 1947. The subcontinent was divided into the secular state of India and the smaller Muslim state of Pakistan.

A third war between the two countries in 1971 resulted in East Pakistan becoming the separate nation of Bangladesh.

Fundamental concerns in India include the ongoing dispute with Pakistan over Kashmir, massive overpopulation, environmental degradation, extensive poverty, and ethnic strife, all this may despite impressive gains in economic investment and output.

India's population is estimated at nearly 1.07 billion and is growing at 1.7% a year. It has the world's 12th largest economy--and the third largest in Asia behind Japan and China--with total GDP of around $570 billion. Services, industry and agriculture account for 50.7%, 26.6% and 22.7% of GDP respectively.

Nearly two-thirds of the population depends on agriculture for their livelihood. About 25% of the population lives below the poverty line, but a large and growing middle class of 320-340 million has disposable income for consumer goods.

India is continuing to move forward with market-oriented economic reforms that began in 1991. Recent reforms include liberalized foreign investment and exchange system, industrial decontrol, significant reductions in tariffs and other trade barriers,

reform and modernization of the financial sector, significant adjustments in government monetary and fiscal policies and safeguarding intellectual property rights.

Real GDP growth for the fiscal year ending March 31, 2004 was 8.17%, up from the drought-depressed 4.0% growth in the previous year.

Growth for the year ending March 31, 2005 is expected to be between 6.5% and 7.0%. Foreign portfolio and direct investment in-flows have risen significantly in recent years. They have contributed to the $120 billion in foreign exchange reserves at the end of June 2004. Government receipts from privatization were about $3 billion in fiscal year 2003-04.

However, economic growth is constrained by inadequate infrastructure, a cumbersome bureaucracy, corruption, labor market rigidities, regulatory and foreign investment controls, and high fiscal deficits. The outlook for further trade liberalization is mixed.

India eliminated quotas on 1,420 consumer imports in 2002 and has announced its intention to continue to lower customs duties. However, the tax structure is complex with compounding effects of various taxes.

But now ,something has been changed gradually. As the largest and most influential country in South Asia, India developed

with annul average growth rate of 6.5% since economic reform in 1991 and reach about 8% in 2004.Much study has pointed out that India will be another engine of world economy besides China.

Goldman, the famous investment bank has anticipated that India ,China, Brazil and Russia will grow into larger economy .

They will belong to the top six largest economy in 2050, another two are U.S.A and Japan.

According to report of World Bank, if India continued economy reform and reduce fiscal deficit, it is very possible for India to keep annual average growth rate of 8% for a long period.

experts and various studies conducted across the globe envisage India and China to rule the world in the 21st century.

For over a century the United States has been the largest economy in the world but major developments have taken place in the world economy since then,

leading to the shift of focus from the US and the rich countries of Europe to the two Asian giants- India and China.

The rich countries of Europe have seen the greatest decline in global GDP share by 4.9 percentage points, followed by the US and Japan with a decline of about 1 percentage point each.

Within Asia, the rising share of China and India has more than made up the declining global share of Japan since 1990. During the seventies and the eighties, ASEAN countries and during the eighties South Korea, along with China and India, contributed to the rising share of Asia in world GDP.

According to some experts, the share of the US in world GDP is expected to fall (from 21 per cent to 18 per cent) and that of India to rise (from 6 per cent to 11 per cent) in 2025, and hence the latter will emerge as the third pole in the global economy after the US and China.

By 2025 the Indian economy is projected to be about 60 per cent the size of the US economy. The transformation into a tri-polar economy will be completed by 2035, with the Indian economy only a little smaller than the US economy but larger than that of Western Europe.

By 2035, India is likely to be a larger growth driver than the six largest countries in the EU, though its impact will be a little over half that of the US.

India is slated to become the third largest economy with a share of 14.3 per cent of global economy by 2015 and graduate to become the "third pole" and growth driver by 2035.

As the share of USA in World GDP falls from 21 to 18 per cent and that of India rises from 6 to 11 per cent in 2025, the latter emerges as third pole in the global economy, according to ADB India Economic Bulletin.

India, which is now the fourth largest economy in terms of purchasing power parity, will overtake Japan and become third major economic power within 10 years.

The most interesting achievement in India may be the development of software industry.

The rapidly growing software sector is boosting service exports and modernizing India's economy. Revenues from IT industry are expected to cross $20 billion in 2004-05. Software exports were $12.5 billion in 2003-04.

PC penetration is 8 per 1,000 persons, but is expected to grow to 10 per 1,000 by 2005. The country has 52 million cable TV customers.

It is very difficult to imagine how software industry can get so well developed in a developing country with 0.4 billion illiteracy in 1 billion people of total population, in a country with modern political structure and semi-modern economic structure and pre-modern

social structure. Maybe it is really a miracle.Besides that, India is also proud of its fairly

perfect and effective financial market. The bad debt ratio of bank is less than 10%.

And Pakistan ,another important country enjoy growth rate of about 8.4% in 2004-2005 .

Secondly, the tension between India and Pakistan became relaxed to a certain degree.

And the competition may transfer gradually from military field to economy development.

Another, in Sri Lanka in 2002, a permanent agreement for ceasefire got concluded between government and anti-government army, and then the blood conflict of 20 years came to an end.

All of these show that South Asia may gradually clear up the disputes and conflicts based on different languages ,races, nationalities ,religions and custom and devote more efforts to economy development and social progress.

What all of these mean to South Asia? To the other developing country? To the whole world?

1 Is it possible for India to continue its quickly growth and realize take-off in the near future? If possible, Whether India’s growth can drive the development of the whole South Asia?

2 Why India developed software industry so successfully ? What is the influence of successful software industry on the whole economy development ?

Is it possible for India to surpass the stage of manufacturing and grow up into directly a developed country by only outstanding service industry ?

3 If all mentioned above become possible ,then to what degree India’s experience is suitful for other developing country such as China?

4 If India realize continued economy growth , how it will change or influence world economy?

5 How other country including developed country such as U.S.A and developing country such as China will deal with this new situation? More competition or more cooperation?

6 what ’s the meaning of the development of South Asia for the whole world?

These are what I plan to discuss in these course. I am willing to share my Opinion with you. No certain answer exist, everything is open.

Part 2: A short introduction about countries in South Asia

India

India, officially Republic of India, (2001 provisional pop. 1,027,015,247), 1,261,810 sq mi (3,268,090 sq km), S Asia. The second most populous country in the world, it is also sometimes called Bharat, its ancient name.

India's land frontier (c.9,500 mi/15,290 km long) stretches from the Arabian Sea on the west to the Bay of Bengal on the east and touches Pakistan (W); China, Nepal, and Bhutan (N); Bangladesh, which forms an enclave in the northeast; and Myanmar (E). New Delhi is India's capital and Bombay (Mumbai) its largest city.

People and Culture

India is the world's second most populous nation (after China). Its ethnic composition is complex, but two major strains predominate: the Aryan, in the north, and the Dravidian, in the south. India is a land of great cultural diversity, as is evidenced by the enormous number of different languages spoken throughout the country.

Although Hindi (spoken in the north) and English (the language of politics and commerce) are used officially, more than 1,500 languages and dialects are spoken. The Indian constitution recognizes 15 regional languages .Ten of the major states of India are generally organized along linguistic lines.

Although the constitution forbids the practice of “untouchability,” and legislation has been used to reserve quotas for former untouchables (and also for tribal peoples) in the legislatures, in education, and in the public services, the caste system continues to be influential.

About 80% of the population is Hindu, and 14% is Muslim. Other significant religions include Christians, Sikhs, and Buddhists. There is no state religion. The holy cities of India attract pilgrims from throughout the East.

With its long and rich history, India retains many outstanding archaeological landmarks; preeminent of these are the Buddhist remains ,the cave temples ,the temple sites at. And other aspects of Indian culture include Hindu music; Indian art and architecture; Indian literature; architecture; and so on.

Economy

Economically, India often seems like two separate countries: village India, supported by primitive agriculture, where tens of millions—one fourth of population—live below the poverty line; and urban India, one of the most heavily industrialized areas in the world, with an increasingly middle-class population.

Agriculture (about 55% of the land is arable) makes up some 25% of the gross domestic product (GDP) and employs almost 70% of the Indian people. Vast quantities of rice are grown wherever the land is level and water plentiful; other crops are wheat, pulses, sugarcane, and corn.

Cotton, tobacco, oilseeds, and jute are the principal nonfood crops. There are large tea plantations in Assam, Karnataka, Kerala, and Tamil Nadu. The opium poppy is also grown, both for the legal pharmaceutical market and the illegal drug trade.

Fragmentation of holdings, outmoded methods of crop production, and delays in acceptance of newer, high-yielding grains were characteristic of Indian agriculture in the past, but since the Green Revolution of the 1970s, significant progress has been made in these areas.

Improved irrigation, the introduction of chemical fertilizers, and the use of high-yield strains of rice and wheat have led to record harvests, and India became an net exporter of grain in the early 1980s.

The subsistence-level existence of village India, ever threatened by drought, flood, famine, and disease, has been somewhat alleviated by government agricultural modernization efforts,

but although India's gross food output is sufficient for the needs of its enormous population, government price supports and an inadequate distribution system still threaten many impoverished Indians with hunger and starvation. An estimated 40% of the population is too poor to afford adequate nourishment regularly.

India has perhaps more cattle per capita than any other country, but their economic value is severely limited by the Hindu prohibition against their slaughter. Goats and sheep are raised in the arid regions of the west and northwest. Water buffalo are raised and there is a large fish catch.

India has forested mountain slopes, with stands of oak, pine, teak, palms, and bamboo, and the cutting of timber is a major rural occupation. Aside from coal, iron, manganese, and in which the country ranks high, India's mineral resources, although large, are not as yet fully exploited.

The Chota Nagpur Plateau of S Jharkhand and the hill lands of SW West Bengal, N Orissa, and Chhattisgarh are the most important mining areas; they are the source of coal, iron, mica, and copper. There are workings of magnesite, bauxite, chromite, salt, and gypsum. Despite oil fields in Assam and Gujarat states and the spectacular output (since the 1970s) of Bombay High offshore oil fields, India is deficient in petroleum.

Industry in India, traditionally limited to agricultural processing and light manufacturing, especially of cotton, woolen, and silk textiles, jute, and leather products, has been greatly expanded and diversified in recent years.

There are large textile works at Bombay and Ahmadabad, a huge iron and steel complex (mainly controlled by the Tata family) at Jamshedpur, and steel plants at Rourkela, Bhilainagar, Durgapur, and Bokaro. Bangalore has electronics and armaments industries.

India also produces large amounts of machine tools, transportation equipment, chemicals, and cut diamonds (it is the world's largest exporter of the latter) and has a significant computer software industry.

. Its large film industry is concentrated in Bombay, with other centers in Calcutta and Madras. In the 1990s the government departed from its traditional policy of self-reliant industrial activity and development and worked to deregulate Indian industry and attract foreign investment.

Since then the service industries have grown; international call centers provide employment for an increasing number of workers.

Most towns are connected by state-owned railroad systems, one of the most extensive networks in the world.

The train system is made mainly of broad-gauge track but includes a variety of rail gauges, which makes frequent transshipment necessary; the country is in the process of converting all tracks to broad gauge.

Transportation by road is increasing, with the improvement of highways and the introduction of ordinary and luxury bus service on long-distance routes, but in rural India the bullock cart is still an important means of transportation.

There are international airports at New Delhi, Calcutta, Bombay, and Madras. The leading ports are Bombay, Madras, Calcutta, and Kochi, . The leading exports are gems and jewelry, clothing, engineering goods, chemicals, computer software, cotton thread, fabric, and handicrafts.

The chief imports are machinery, petroleum, fertilizers, and chemicals. India's major trade partners are the United States, European Union countries, Hong Kong, Kuwait, Saudia Arabia, and Japan.

Parkistan

history

Pakistan was born out of the partition of India in 1947. It was created to meet the demands of Indian Muslims 'for their own homeland'.

The erstwhile two parts: the east wing or present-day Bangladesh is on the Bay of Bengal bordering

India and Burma and the west wing or present-day Pakistan stretches from the Himalayas down to the Arabian Sea.

Shortly after independence, India and Pakistan went to war over the disputed northern territory of Kashmir.

The two countries fought again in 1965. The war in 1971 led to the creation of Bangladesh. Alternating periods of civilian and military rule have not helped to establish stability in Pakistan.

Despite largely successful UN efforts at voluntary repatriation, thousands of Afghan refugees continue to reside in Pakistan.

Though General Musharraf pledged to revive the country's fortunes after the bloodless coup in 1999, but he faced economic challenges (and law and order problems mainly in the southern province of Sindh).

Tension also persists with India over Kashmir and a nuclear arms race began after Pokhran blasts.

Facts

Population: 157 million (UN, 2004)Capital: IslamabadArea: 796,095 sq km (307,374 sq miles) (excluding Pakistani-held parts of Kashmir)Major languages: Urdu (official), Punjabi, Sindhi, Pashto, Balochi and English

Major religion: IslamLife expectancy: 61 years (men), 61 years (women) (UN)Monetary unit: 1 Pakistani Rupee = 100 paisaMain exports: Textile products, rice, cotton, leather goodsGNI per capita: US $470 (World Bank, 2003) Major religion: Islam

Culture

Nearly all Pakistanis are Muslim, and Islam is the state religion. Christians are the largest minority, followed by Hindus and Parsees, descendants of Persian Zoroastrians .

The pleasures of Pakistan are ancient: Buddhist monuments, Hindu temples, Islamic palaces, tombs, pleasure grounds and Anglo-Mogul mansions - some in a state of dereliction which makes their former grandeur more emphatic.

Pakistani culture is largely rural yet beset by the problems of hyperurbanization. The cities are more crowded than ever; parts of Karachi and Lahore are more densely populated even than Dhaka, the capital of Bangladesh.

Since its freedom in 1947, Pakistan has enjoyed a robust and expanding economy, but wealth is poorly distributed. Almost one-third of all Pakistanis live in poverty. It is a male-controlled society in which social development has taken a back seat.

"Three things symbolised Pakistan's material culture in the 1990s: videocassette recorders, locally manufactured Japanese Suzuki cars, and Kalashnikov rifles," said an anonymous writer.

Videocassette tapes can be rented in many small villages, where residents also watch Cable News Network (CNN)--censored through Islamabad--on televisions that are as numerous as radios were in the 1970s.

Economy

Overview

Agriculture is the mainstay of Pakistan's economy, employing almost 50 per cent of the population. Wheat, rice, cotton, sugarcane, and tobacco are the chief crops, and cattle and sheep are raised.

Most of Pakistan's agricultural output comes from the Indus basin. The country is now self-sufficient in food, as vast irrigation schemes have extended farming into arid areas, and fertilizers and new varieties of crops have increased yields.

Pakistan's industrial base is able to supply many of the country's needs in consumer goods, although production has slowed in recent years.

The country's natural resources provide materials for such industries as textile production (the biggest earner of foreign exchange), oil refining, metal processing, and cement and fertilizer production. Remittances from Pakistanis working abroad constitute the second largest source of foreign exchange

Since the mid-1950s electric power output has greatly increased, mainly because of the development of hydroelectric power potential and the use of thermal power plants.

Pakistan's chief imports are petroleum, machinery, transport equipment, chemicals, and edible fats and oils.

The chief trading partners are the European Union nations, the United States, Japan, and China. In the late 1990s, following years of lax fiscal policies, Pakistan appeared on the verge of bankruptcy, with a foreign debt of over $30 billion.

Concern

Ringing alarm bells over increasing numbers of poor and unemployed in Pakistan, the country's state bank said recently, the level of poverty rose to 33 per cent from 20 per cent in the last 15 years, even though the economy looked up with a growth rate of 5.1 per cent.

The performance of public companies and poverty reduction strategies are areas of continuing concern.

TrendsPakistan's economy in fiscal 2002-3

demonstrated strong resilience in the face of a continuing global economic downturn.

The global recession was fueled by hikes in oil prices inthe wake of the Iraq war, an outbreak of SARS in the Asia-Pacific region, and the continuing sluggish performance of US markets.

Despite these challenges, Pakistan managed to register a 5.1% GDP growth rate and attained significant macroeconomic stability, reports said.

The manufacturing and agricultural sectors emerged as the main engines of growth, experiencing 7.7 per cent and 5.8 per cent growth rates respectively over the year.

Manufacturing growth was led by a sharp increase in automobile production, while the best agricultural performers were rice and wheat.

In addition, a number of trends in the macroeconomy revealed positive signs of Pakistan's economic performance

Foreign exchange reserves touched $10.5 billion; four billion dollars were added to the reserves over the last one year.

Pakistan secured over $800 million of foreign direct investment over the fiscal year. Per capita income increased by 17.4 per cent over the fiscal year. It constitutes a significant step towards achieving a higher standard of living.

Bangladesh

Facts

GDP - Per capita: Purchasing power parity - $1,900 (2004 est.)GDP - Composition by sector: Agriculture: 21.7%, Industry: 26.6%, Services: 51.7% (2004 est.)

Investment (gross fixed): 23.2% of GDP (2004 est.)Population below poverty line: 35.6% (2004 est.)Unemployment rate: 40% (includes underemployment) (1)Budget: Revenues: $5.352 billion, expenditures: $7.55 billion, including capital expenditures of NA (2004 est.)

Agriculture - Products: rice, jute, tea, wheat, sugarcane, potatoes, tobacco, pulses, oilseeds, spices, fruit; beef, milk, poultryIndustries: Cotton textiles, jute, garments, tea processing, paper newsprint, cement, chemical fertilizer, light engineering, sugarElectricity - production: 15.33 billion kwh (2001)

Electricity - consumption: 14.25 billion kwh (2001)Oil - production: 3,581 bbl/day (2001 est.)Oil - consumption: 71,000 bbl/day (2001 est.)Natural gas - production: 9.9 billion cu m (2001 est.)

Natural gas - consumption: 9.9 billion cu m (2001 est.)Exports - commodities: Garments, jute and jute goods, leather, frozen fish and seafood (2001)

Imports - commodities: machinery and equipment, chemicals, iron and steel, textiles, foodstuffs, petroleum products, cement (2000)

Economy

Bangladesh ranks as one of the poorest nations of the world. It has an average annual per capita income of about $150 a year. The economy of Bangladesh is underdeveloped and depends almost entire on agriculture. Waterways serve as the chief transportation routes in Bangladesh.

Bangladesh is essentially an agricultural country. The vast majority of Bangladesh's inhabitants - almost 80 per cent - live in its rural areas, and 65 per cent of its labour force are involved in farming, particularly for food .

Agriculture contributes 22 per cent to Bangladesh's GDP. This does not include the unmeasured contributions of women farmers.

Nearly half of the Bangladeshi farming force is comprised of women, who play a major role in various aspects of food and rice production, and in nearly all aspects of food processing. More than half of GDP is generated through the service sector.

Despite sustained domestic and international efforts to improve economic and demographic prospects, Bangladesh remains one of the world's poorest, most densely populated, and least developed nations.

Once part of British India and then Pakistan, Bangladesh suffered from chronic economic neglect. The overall density, 891 persons per sq km in 2002 is much higher than that of other countries except for microstates such as Singapore.

Bangladesh supports a large rural population, with 21 per cent of the Bangladeshi people classified as urban in 1999. Throughout the 1980s, Bangladesh became highly dependent on foreign aid, although this brought little real change in the lives of its people.

Major impediments to growth include frequent cyclones and floods, inefficient state-owned enterprises, insufficient port facilities, a rapidly growing labour force that cannot be absorbed by agriculture, delays in exploiting energy resources (natural gas), insufficient power supplies, and slow implementation of economic reforms.

Reform is stalled in many instances by political infighting and corruption at all levels of government.

The region that produced large quantities of agricultural goods, including most of the world's jute, received little investment in such basic items as transportation facilities and industrial plants. Bangladesh's gross domestic product was around at $46 billion in 1999.

Jute and tea, which are principal sources of foreign exchange, follow rice as the most valuable agricultural products. The nation produces about one-fifth of the world's supply of raw jute.

Other valuable agricultural products are wheat, pulses (leguminous plants, such as peas, beans, and lentils), sweet potatoes, oil seeds of various kinds, sugarcane, tobacco, and fruits such as bananas, mangoes, and pineapples.

At the time of independence, Bangladesh pursued a socialist economic policy. Despite its low GNP per capita, Bangladesh has done better in areas of human and social advancement than many other countries with similar income.

By 1977, all nationalised institutions were returned to their former owners, but this resulted in little substantial economic progress. Between 60 per cent and 75 per cent of Bangladesh's population are landless.

Although small, the industrial sector contributes significantly to Bangladesh's exports, providing employment and a market for cash crops.

Industry contributes 27 per cent of Bangladesh's GDP. Since the early 1980s, production of ready-made garments for the US and other markets has grown rapidly.

culture Overview About 82 per cent of the people of Bangladesh

live in rural areas. Bangladesh's Muslims and Hindus live in relative harmony. The Muslim majority has religious leaders, pirs, whose status straddles the gap between that of a bishop and that of a sage.

As Hinduism in Bangladesh lacks Indian version's pomp, Hindu ceremonies are rarely conducted in the depths of temples to which access is restricted.

Islamic slant of the country's intellectual life tends to deny the achievements of the preceding Hindu and Buddhist cultures.

People and religion:

About 90 per cent of the people are Muslims. Less than 10 per cent of the people of Bangladesh are Hindus.

Hindus are divided into various castes. Inter-marriage between castes is rare. Hindu women have few legal rights. Most of the ethnic groups of the Chittagong Hills area practise Buddhism.

Some groups combine Buddhist principles with local religious beliefs. Less than 1 per cent of the people of Bangladesh are Christians. Most Muslim parents arrange marriages for their children. Most Muslim men in Bangladesh are too poor.

Women's status:

The men in a Muslim family have far more authority and freedom than the women have. Many Muslim women avoid social contact with men who do not belong to their family, and they participate in few activities outside the home.

They cover their heads with veils in the presence of strangers. In 1988, a constitutional amendment made Islam the state religion of Bangladesh.

Way of lifeMost Bangladeshis farm the land with

simple tools and ancient methods, much as their ancestors did many years ago.

Since the mid-1970s, however, there has been increasing use of fertilizers and new kinds of seeds. About 70 per cent of all adult Bangladeshis cannot read and write.

Few homes in rural areas have electricity or plumbing. Most of the families in the cities and towns live crowded together in small wooden houses.

Some wealthy city families have large brick or concrete homes. Most Hindus and members of other minority groups live together in distinct neighbourhoods.

Education:

About 30 per cent of all Bangladeshis can read and write. Bangladesh has about 31,700 elementary and high schools and about 300 colleges and technical schools. The University of Dhaka is the nation's largest university. Dhaka is also the home of the Jahangirnagar University and Bangladesh University of Engineering and Technology.

Communication: Bangladesh has many Bangla and English-language newspapers. The government owns the nation's radio stations and television stations. Radio is available everywhere.

Nepal

Overview

With its ancient culture and the Himalayas as a backdrop, the landlocked Kingdom of Nepal has for many years been the destination of choice for foreign travellers in search of adventure.

With the world's highest mountain, Everest, and spectacular scenery and wildlife, the country has become a popular destination for tourists.

It also boasts a distinctive Hindu and Buddhist culture. But it faces a number of environmental challenges such as deforestation, encroachment on animal habitats and vehicle pollution in the capital, Kathmandu.

In 1951, the Nepalese monarch ended the century-old system of rule by hereditary premiers and instituted a cabinet system of government.

Reforms in 1990 established a multiparty democracy within the framework of a constitutional monarchy. A Maoist insurgency, launched in 1996, has gained traction and is threatening to bring down the regime.

In 2001, the Crown Prince massacred ten members of the royal family, including the king and queen, and then took his own life.

In October 2002, the new King dismissed the prime minister and his cabinet for "incompetence" after they dissolved the Parliament and were subsequently unable to hold elections because of the ongoing insurgency

The country is now governed by the King and his appointed cabinet, which has negotiated a cease-fire with the Maoist insurgents until elections can be held at some unspecified future date.

Facts:Population: 25.7 million (UN, 2004)Capital: KathmanduArea: 147,181 sq km (56,827 sq miles)Location: Between China and India;

contains eight of world's 10 highest peaks, including Mount Everest - the world's tallest - on the border with China

Climate: Varies from cool summers and severe winters in north to subtropical summers and mild winters in south

Major language: Nepali Major religions: Hinduism (official), Buddhism Life expectancy: 60 years (men), 60 years

(women) (UN)

Monetary unit: 1 Nepalese rupee = 100 paisa Main exports: Carpets, clothing, leather

goods, jute goods, grain GNI per capita: US $240 (World Bank, 2003)

Economy

One of the least developed counties in the world, that is how the United Nations (UN) sees Nepal .

The nation's gross domestic product (GDP) was $5 billion in 1999; with per capita GDP of $210.

Landlocked geography, rugged terrain, deficiency of natural resources, and poor infrastructure have mainly contributed to Nepal's underdevelopment.

China, India, Japan, the United States, and several European nations have made large investments in Nepal's economy through foreign aid since 1952. Still, the nation's economic growth has been slow .

Nepal's economy is characterised by heavy dependence on foreign aid, a narrow range of exports, increasing economic disparity between the mountain areas and the more developed Tarai region, excessive governmental control and regulation, and inefficient public enterprises and administration.

Tourism, a chief source of foreign exchange (along with international aid and Gurkha pensions), has been hurt by the escalation of the conflict with the country's Maoist rebels. Nepal's trade is overwhelmingly with India. In recent years, significant deforestation and a growing population have greatly affected the country.

In addition, the economy has not kept pace with the nation's high population growth. In particular, the slow growth of agriculture has resulted in food shortages and malnutrition for some of Nepal's people.

The economy is heavily dependent on imports of basic materials and on foreign markets for its forest and agricultural products.

Nepal imports essential commodities, such as fuel, construction materials, fertilizers, metals, and most consumer goods, and exports such products as rice, jute, timber, and textiles

The political and administrative system of Nepal has not made those changes in trade, investment, and related economic policies that would expedite economic development and attract foreign capital. The government's development programmes, which are funded by foreign aid, also have failed to respond directly to the needs of rural people.

Agriculture is the mainstay of the economy, providing a livelihood for over 80 per cent of the population and accounting for 41 per cent of GDP .

Industrial activity mainly involves the processing of agricultural produce including jute, sugarcane, tobacco, and grain.

Production of textiles and carpets has expanded newly and accounted for about 80 per cent of foreign exchange earnings in the past three years.

Agricultural production is growing by about 5 per cent on average as compared with annual population growth of 2.3 per cent.

Nepal has considerable scope for accelerating economic growth by exploiting its potential in hydropower and tourism, areas of recent foreign investment interest. Prospects for foreign trade or investment in other sectors will remain poor.

The international community's role of funding more than 60 per cent of Nepal's development budget and more than 28 per cent of total budgetary expenditures will likely continue as a major ingredient of growth.

Culture

Land-linked between India and China, Nepal is the meeting place of central and south Asia, and as such is a country replete with tremendous cultural, linguistic, social, geological, and biological diversity.

Nepal is often characterised as a nation caught in two different worlds, having one leg in the sixteenth century and another in the 20th century .

At once a time machine and a magic carpet, Nepal sweeps you along crooked, ancient streets flanked by irregular, multi-roofed pagodas, stupas and stone sculptures, and into rooms cluttered with horror-eyed masks, spinning prayer wheels, trippy thangka scrolls and Tibetan carpets.

Social status:

There was no doubt among observers that only an increasing flow of foreign aid and loans had kept Nepal from bankruptcy.

Yet there seemed to be little to demonstrate suggesting that the aid had alleviated mass poverty and uplifted the society as a whole.

Unemployment among the educated was partially addressed through the continued development of government jobs, but such development resulted in bureaucratic redundancy and, in fact, hindered economic development.

Furthermore, such a strategy had only a limited ability to reduce the mass unemployment and underemployment that typified Nepal's society .

Widespread unemployment and underemployment, which fuelled poverty, further were exacerbated by continued rapid population growth.

Despite a long-term and vigorous family planning programme, the population has been growing at an increasing rate.

Sri Lanka

Overview

The Sinhalese arrived in Sri Lanka late in the 6th century BC, probably from northern India. Buddhism was introduced beginning in about the mid-third century BC, and a great civilisation developed at the cities of Anuradhapura (kingdom from circa 200 BC to circa 1000 AD) and Polonnaruwa (from about 1070 to 1200).

Facts:

Population: 19.2 million (UN, 2004)Capital: Colombo (commercial), Sri Jayawardenepura (administrative)Area: 65,610 sq km (25,332 sq miles)Major languages: Sinhala, Tamil, EnglishMajor religions: Buddhism, Hinduism, Islam, Christianity

Life expectancy: 70 years (men), 76 years (women) (UN)Monetary unit: 1 Sri Lankan rupee = 100 centsMain exports: Clothing and textiles, tea, gems, rubber, coconutsGNI per capita: US $930 (World Bank, 2003)

Economy

Famous historically for its cinnamon and tea and moderately socialist after independence, Sri Lanka has in the last 20 years increasingly engaged in privatisation and moved towards market-oriented policies and export-oriented trade.

While tea and rubber are still important in the economy, the most dynamic sectors now are food processing, textiles and apparel, food and beverages, telecommunications, and insurance and banking.

By 1996 plantation crops made up only 20 per cent of exports (compared with 93 per cent in 1970), while textiles and garments accounted for 63 per cent.

GDP grew at an average annual rate of 5.5 per cent throughout the 1990s until a drought and a deteriorating security situation lowered growth to 3.8 per cent in 1996.

he economy rebounded in 1997-2000 with average growth of 5.3 per cent. But 2001 saw the first contraction in the country's history, due to a combination of power shortages, severe budgetary problems, the global slowdown, and continuing civil strife.

However, it is now showing signs of recovery after the Government and the LTTE signed a ceasefire in 2002. Colombo stock exchange reported the highest growth in Asia for 2003. Today, Sri Lanka has the highest per capita income in South Asia.

Culture

Ethnic intolerance and militant readings of religious philosophy are largely responsible for the tragedy of Sri Lanka.

The Sinhalese are predominantly Buddhist, the Tamils mainly Hindus, and there are sizeable Muslim and Christian Burgher (descendants of Dutch colonists) minorities.

The Tamils in the hill country - recent low caste arrivals brought in by the British to work on the plantations - share little in common with the Tamils of the north who have been in Sri Lanka for over 1000 years.

Maldives

People of Maldives:

he origins of the Maldivians are lost in history. Archaeological finds indicate that the islands were inhabited as early as 1500 BC, and there are tales of a legendary people called the Redin, who may have been among the earliest of explorers.

It is believed that Aryan immigrants from the Indian subcontinent established permanent settlements around 500 BC. The early Maldivians were probably Buddhists or Hindus migrating from the Indian subcontinent.

Today, Maldives is perhaps the only country with a hundred per cent Sunni Muslim population. Islam was introduced around AD 800, and the moderate form practised in Maldives has remained virtually unchanged.

Religion:  Islam

Economy

Tourism, Maldives' largest industry, accounts for 20 per cent of GDP and more than 60 per cent of the Maldives' foreign exchange receipts. Fishing is a second leading sector.

Over 90 per cent of government tax revenue comes from import duties and tourism-related taxes.

The Maldivian Government began an economic reform programme in 1989 initially by lifting import quotas and opening some exports to the private sector.

Subsequently, it has liberalised regulations to allow more foreign investment. Agriculture and manufacturing continue to play a lesser role in the economy, constrained by the limited availability of cultivable land and the shortage of domestic labour.

Industry, which consists mainly of garment production, boat building, and handicrafts, accounts for about 18 per cent of GDP. Maldivian authorities worry about the impact of erosion and possible global warming on their low-lying country; 80 per cent of the area is one meter or less above sea level.

Facts:

GDP: Purchasing power parity - $1.25 billion (2002 est.)

GDP - Real growth rate: 2.3 per cent (2002 est.)

GDP - Per capita: purchasing power parity - $3,900 (2002 est.)

Budget: Revenues: $224 million (excluding foreign grants), expenditures: $282 million, including capital expenditures of $80 million (2002 est.)

Agriculture - Products: coconuts, corn, sweet potatoes; fish

Industries: Fish processing, tourism, shipping, boat building, coconut processing, garments, woven mats, rope, handicrafts, coral and sand mining .

Electricity - Production: 117 million kwh (2001)

Electricity - Consumption: 108.8 million kwh (2001)

Oil - consumption: 3,200 bbl/day (2001 est.)

Bhutan

Culture:

It is believed that the name Bhutan is derived from the Sanskrit 'Bhotant', meaning 'the end of Tibet', or from 'Bhu-uttan', meaning 'high land'. Historically the Bhutanese have referred to their country as Druk Yul, 'land of the thunder dragon'. Bhutanese refer to themselves as Drukpa people.

The Buddhist Kingdom of the Peaceful Thunder Dragon lies in the eastern Himalayas, between Tibet to the north, the Indian territories of Assam and West Bengal, to the south and east, and Sikkim to the west.

The Kingdom has a total area of about 47,000 square kilometres, about the size of Switzerland. Located in the heart of the high Himalayan mountain range, Bhutan is a land-locked country surrounded by mountains. Bhutan remains mainly a rural country with 90 per cent of the people engaged in farming.

Bhutan is home to one of the world's richest natural environments and a virtually untouched and vibrant Buddhist culture. The Kingdom has over 72 per cent of the land under forest cover that shelters several species of flora and fauna, including many rare and endangered species.

Bhutan is the only country to maintain Mahayana Buddhism in its Tantric Vajrayana form as the official religion. Indeed, religion is the focal point for the arts, festivals and a considerably above average number of individuals.

Bhutanese culture derives from ancient Tibetan culture. Dzongkha and Sharchop, the principal Bhutanese languages, are closely related to Tibetan, and Bhutanese monks read and write the ancient variant of the Tibetan language known as chhokey.

Economy

One of the world's smallest and least developed economies - Bhutan - is based on agriculture and forestry, providing the main livelihood for more than 90 per cent of the population. Agriculture consists largely of subsistence farming and animal husbandry

Most development projects, such as road construction, rely on Indian migrant labour. Bhutan's hydropower potential and its attraction for tourists are key resources. The industrial sector is technologically backward, with most production of the cottage industry type.

Each economic programme takes into account the government's desire to protect the country's environment and cultural traditions. For example, the government in its cautious . expansion of the tourist sector encourages the visits of upscale, environmentally conscientious visitors.

Bhutan's economy is wholly dependent on India. It was the benevolent Nehru, who put Bhutan on the path of economic development. India has been the largest donor of external aid to Bhutan and its main development partner.

Bhutan's first Five Year Economic Development Plan (1962-67) was totally funded by India. India had committed Nu/Rs.9000 million (US $ 215 million) for the Eighth Plan (1997-2002).

Once totally dependent on India for its development assistance and government's establishment expenses, Bhutan has been increasingly turning to various bilateral, multilateral, and international finances.

Model education, social, and environment programmes are underway with support from multilateral development organisations.

The United Nations, World Bank, Asian Development Bank, Australia, Austria, Finland, Denmark, Japan, Netherlands, Norway, Canada, Switzerland, Germany, Italy, New Zealand, Sweden, Republic of Korea, United Kingdom and the United States provide foreign aid to Bhutan.

Bhutan's economy saw a healthy growth in 2002 with the GDP climbing to 7.7 per cent in 2002 from 6.6 the previous year, according to the annual report of Bhutan's central bank, the royal monetary authority (RMA), and the momentum was maintained in 2003.

The renewable natural resources sector which includes livestock, forestry, logging and major cash crops like mandarin and apple, continued to dominate the share of the GDP with 33 per cent in 2002.

It remains the most significant sector, employing about 75 per cent of the country's labour force, the report pointed out. Construction and electricity were also key players in 2002, contributing 17 per cent and 9.7 per cent.

Facts:

GDP: Purchasing power parity - $2.7 billion (2003 est.)

GDP - Real growth rate: 7.7% (2003 est.)

GDP - Per capita: Purchasing power parity - $1,300 (2003 est.)

Budget: Revenues: $146 million expenditures: $152 million, including capital expenditures of NA 

Agriculture - Products: Rice, corn, root crops, citrus, food grains; dairy products, eggs 

Industries: Cement, wood products, processed fruits, alcoholic beverages, calcium carbide

Electricity - Consumption: 379.5 million kwh (2001) Exports: 1.4 billion kwh (2001) Electricity - Imports: 16 million kwh (2001) Population: 2.3m (UN, 2004)

Capital: ThimphuArea: 38,364 sq km (14,812 sq miles)Major language: Dzongkha (official)Major religions: Buddhism (official), Hinduism

Life expectancy: 62 years (men), 64 years (women) (UN)Monetary unit: 1 ngultrum = 100 chetrumMain exports: Electricity, timber, cement, agricultural products, handicraftsGNI per capita: US $660 (World Bank, 2003)

Climate: Varies; tropical in southern plains; cool winters and hot summers in central valleys; severe winters and cool summers in Himalayas Terrain: Mostly mountainous with some fertile valleys and savanna Natural resources: Timber, hydropower, gypsum, calcium carbide

Part 3:India:history,culture,religion and society

3.1 history and culture

India.  Birthplace of civilizations, cradle of religions, still home to almost a quarter of the world's people.  India has dominated the world stage through most of human history, as the home of mighty empires, as a powerful trading nation, and as a wellspring of culture and civilization.

India has always intrigued and fascinated the rest of the world.  The "fabulous Indies".  Rumours of its empires and its wealth brought traders and travelers.  Alexander the Great marched across Asia to India.  Arab and Jewish traders sailed here. 

At one time Roman soldiers were barracked here.  The ancient Greeks had trading colonies.  Columbus wasn't looking for America.  He hoped to find a new route to India.  European history dramatically favoured nations with an India connection.

India excelled in international trade.  Five thousand years ago the thriving cities of the Indus Valley traded with Mesopotamia.  Indian traders spread their goods and influence through South East Asia.  The Hindu island of Bali is one surviving remnant of a great trading empire.  

Spices, gems, pearls and silks flowed out of India into the rest of the world.  Crafts, textiles, and exotic birds and animals were also traded.  Hannibal's elephants came from India.  So did many of the lavish fabrics craved by Roman nobility.  At one point, so much gold was leaving Rome for India that the Roman economy was seriously weakened.  

India was the 'Japan' of the ancient world, dominating trade relationships.  Ideas and culture spread with trade goods.  India gifted a numbering system and mathematics to the world. 

 Philosophy, sciences, and medicine reached unrivalled heights, enriching the great scientific achievements of China and the Arab world.  The influences of Indian thought can be found in early European culture, and still today, Indian philosophy is influencing modern global cultures.

India has had an epic history.  Great empires rose and fell.  Colossal armies clashed -hundreds of thousands of soldiers, thousands of elephants and horses, thundering cannons - often at the whims of capricious rulers.  Great fortresses and palaces were built and destroyed.  War, pestilence, or invaders shattered long periods of prosperity and peace.  

The colonial era brought new and different challenges to India, culminating in an Independence Movement without parallel, that has left an indelible mark on non-violent struggles for freedom and justice throughout the modern world.  During this dramatic history, society in India wove an intricate web of relationships, rituals, and duties, yet remained astonishingly tolerant and diverse.  

Great religions developed and spread from India.  Hindus, Buddhists, Jains, and Sikhs trace their roots from India.  India has the second largest Muslim population in the world and is home to Animists, Christians, Zoroastrians, Bah'a'is, Jews, and others.  This elaborate history and culture is slowly finding its expression on the World Wide Web.  

Many of the best sites on India have been built by educational institutions around the world.  There are increasing numbers of sites developed in India by Indians, reflecting both the techological skills here and the keen interest in projecting an Indian presence on the Net .

3.2 Religion

India is a land of many religions. The majority of Indians are Hindus, with a large minority of Muslims. Besides, there is Sikhism, Christianity, Jainism, Buddhism, Zoroastrianism and many other religions.

Different religious communities living together, celebrating their festivals make our culture richer and our people more interesting.

In spite of its heterogeneous religious outlook, India is still dominated by Hinduism, the religion of the majority. A discussion of India is thus never complete without touching on Hinduism.

since at least the eighteenth century, India has been associated in the European imagination as preeminently a land of religion. By the late nineteenth century, Europeans (and increasingly Americans) were coming to India as a landthat promised spiritual release from the weariness of the material life.

In the twentieth century, this reputation appeared to be solidified. The struggle for independence came to be waged under the leadership of Gandhi, whose unflinching advocacy of non-violence endeared him to admirers as a man of religion and peace;

; and in the 1960s, when the enduring image of India was as a land suffused spirituality, Westerners flocked to India to avail themselves of the spiritual advice and teachings of countless number of Indian gurus.

This image has taken something of a battering in recent years, and today Westerners, when they think at all of India, think of the country as engulfed by religious 'wars' and hatred, as ensnared by perpetual Hindu-Muslim conflict;

meanwhile, the gross materialism of middle-class Indians, given naked encouragement by the state, indigenous and foreign corporate interests, the culture of modernity, and international finance organizations such as the IMF and the World Bank, has all but eroded the image as a land of sublime spirituality.

What is indubitably unique about India as a 'land of religions' is that it is the birthplace of several major world religions. Three-fourths of the people describe themselves as adherents of Hinduism, the oldest continuous faith in the world. Though today Hinduism has spread to all parts of the world,

taken there by Indian migrants, Hinduism has, and will continue to have, an indelible association with India; and perhaps in no other case is the association between a faith and a land so close as it is with Hinduism. This religion produced a vast corpus of texts.

India is equally a land of other faiths: the world's second largest population of Muslims, nearly 130 million in number, is to be found in India, and there are also some 25 million Christians. Indian Islam has enjoyed a relationship that is at once syncretistic and agonistic with Hinduism, and the fruits of this encounter have been many,

extending from the more obvious vocal and classical music of India, Mughlai cuisine, and Indo-Mughal architecture, to the lived practices common to adherents of both these great faiths. In antiquity, Buddhism flourished in India, and it is in Bodh Gaya that the Buddha gained enlightenment;

his great contemporary, Mahavira, is the founder of Jainism, also uniquely Indian. Today Jains are among India's most distinguished trading and business communities; and the legacy of Jain art and culture is just as profound. Sikhism, another Indian faith, is often imagined as the Protestantism of Hinduism: today there are nearly 15 million Sikhs in India,

and perhaps as many as 2 million outside India, whose practices and precepts may well change the nature of the faith in India. India also has the largest community of Zoroastrians, also known as Parsees, and though in recent years the once-thriving and very old Jewish community of Cochin has all but disappeared, the small Jewish community of Bombay still makes its presence felt in the public realm.

But all these are only the institutionalized forms of religious worship in India, and a bewildering array of other religious practices, both outside the faiths and within the faiths, are encountered all over India. Various devotional poets, religious mendicants, renowned men and women of spirituality,

and local holy men and women wear no religious tags, and their teachings and lives continue to be an example to the common realm of humanity. From the 9th century to the 16th century, from the Deccan to the north, and from Bengal in the east to modern-day Gujarat and Maharashtra in the West, India was swept by the fervor of bhakti, or devotion.

The songs, lyrics, and religious compositions of the bhakti poets — Nammalvar, Jnaneshvar, Kabir, Tulsidas, Surdas, Tukaram, Vidyapati, Chandidasa, Mirabai, among others — are still sung to popular and classical music alike, and scarcely any kind of literature resonates more with Indians than do their compositions.

Similarly, though the institutionalized religions are associated with great architectural monuments, such as the Hindu temple cities of South India (Kanchipuram, Rameswaram, Chidambaram, and many others), the Mughal splendors of Delhi, Agra, and Fatehpur Sikri, or the Golden Temple at Amritsar, the roadside monuments and shrines are even more indicative of the manner in which these faiths interweave with the lives of their adherents.

3.3 society

 Indian society is multifaceted to an extent perhaps unknown in any other of the world's great civilizations. Virtually no generalization made about Indian society is valid for all of the nation's multifarious groups. Comprehending the complexities of Indian social structure has challenged scholars and other observers over many decades.

The ethnic and linguistic diversity of Indian civilization is more like the diversity of an area as variable as Europe than like that of any other single nation-state. Living within the embrace of the Indian nation are vast numbers of different regional, social, and economic groups,

each with different cultural practices. Particularly noteworthy are differences between social structures in the north and the south, especially in the realm of kinship systems. Throughout the country, religious differences can be significant,

especially between the Hindu majority and the large Muslim minority; and other Indian groups--Buddhists, Christians, Jains, Jews, Parsis, Sikhs, and practitioners of tribal religions--all pride themselves on being unlike members of other faiths.

Access to wealth and power varies considerably, and vast differences in socioeconomic status are evident everywhere. The poor and the wealthy live side by side in urban and rural areas. It is common in city life to see a prosperous, well-fed man or woman chauffeured in a fine car pass gaunt street dwellers huddled beneath burlap shelters along the roadway.

In many villages, solid cement houses of landowners rise not far from the flimsy thatched shacks of landless laborers. Even when not so obvious, distinctions of class are found in almost every settlement in India.

Urban-rural differences can be immense in the Indian Society. Nearly 74 percent of India's population dwells in villages, with agriculture providing support for most of these rural residents. In villages, mud-plastered walls ornamented with traditional designs, dusty lanes,.

herds of grazing cattle, and the songs of birds at sunset provide typical settings for the social lives of most Indians herds of grazing cattle, and the songs of birds at sunset provide typical settings for the social lives of most Indians.

In India's great cities, however, millions of people live amidst cacophony--roaring vehicles, surging crowds, jammed apartment buildings, busy commercial establishments, loudspeakers blaring movie tunes--while breathing the poisons of industrial and automotive pollution.

Gender distinctions are pronounced. The behavior expected of men and women can be quite different, especially in villages, but also in urban centers. Prescribed ideal gender roles help shape the actions of both sexes as they move between family and the world outside the home.

Crosscutting and pervading all of these differences of region, language, wealth, status, religion, urbanity, and gender is the special feature of Indian society that has received most attention from observers: caste. The people of India belong to thousands of castes and castelike groups--hierarchically ordered,

named groups into which members are born. Caste members are expected to marry within the group and follow caste rules pertaining to diet, avoidance of ritual pollution, and many other aspects of life.

Given the vast diversity of Indian society, any observation must be tempered with the understanding that it cannot apply to all Indians. Still, certain themes or underlying principles of life are widely accepted in India.

Part 4 economy of India: overview

India's population is estimated at nearly 1.07 billion and is growing at 1.7% a year. It has the world's 12th largest economy--and the third largest in Asia behind Japan and China--with total GDP of around $570 billion. Services, industry and agriculture account for 50.7%, 26.6% and 22.7% of GDP respectively.

Nearly two-thirds of the population depends on agriculture for their livelihood. About 25% of the population lives below the poverty line, but a large and growing middle class of 320-340 million has disposable income for consumer goods. Nearly two-thirds of the population depends on agriculture for their livelihood..

About 25% of the population lives below the poverty line, but a large and growing middle class of 320-340 million has disposable income for consumer goods.

India is continuing to move forward with market-oriented economic reforms that began in 1991. Recent reforms include liberalized foreign investment and exchange regimes, industrial decontrol, significant reductions in tariffs and other trade barriers, reform and modernization of the financial sector, significant adjustments in government monetary and fiscal policies and safeguarding intellectual property rights.

Real GDP growth for the fiscal year ending March 31, 2004 was 8.17%, up from the drought-depressed 4.0% growth in the previous year. Growth for the year ending March 31, 2005 is expected to be between 6.5% and 7.0%. Foreign portfolio and direct investment in-flows have risen significantly in recent years.

They have contributed to the $120 billion in foreign exchange reserves at the end of June 2004. Government receipts from privatization were about $3 billion in fiscal year 2003-04.

However, economic growth is constrained by inadequate infrastructure, a cumbersome bureaucracy, corruption, labor market rigidities, regulatory and foreign investment controls, the "reservation" of key products for small-scale industries and high fiscal deficits. The outlook for further trade liberalization is mixed. I

ndia eliminated quotas on 1,420 consumer imports in 2002 and has announced its intention to continue to lower customs duties. However, the tax structure is complex with compounding effects of various taxes .

The United States is India's largest trading partner. Bilateral trade in 2003 was $18.1 billion and is expected to reach $20 billion in 2004. Principal U.S. exports are diagnostic or lab reagents, aircraft and parts, advanced machinery, cotton, fertilizers, ferrous waste/scrap metal and computer hardware.

Major U.S. imports from India include textiles and ready-made garments, internet-enabled services, agricultural and related products, gems and jewelry, leather products and chemicals. The United States is India's largest trading partner. Bilateral trade in 2003 was $18.1 billion and is expected to reach $20 billion in 2004.

Principal U.S. exports are diagnostic or lab reagents, aircraft and parts, advanced machinery, cotton, fertilizers, ferrous waste/scrap metal and computer hardware. Major U.S. imports from India include textiles and ready-made garments, internet-enabled services, agricultural and related products, gems and jewelry, leather products and chemicals.

The rapidly growing software sector is boosting service exports and modernizing India's economy. Revenues from IT industry are expected to cross $20 billion in 2004-05. Software exports were $12.5 billion in 2003-04. PC penetration is 8 per 1,000 persons, but is expected to grow to 10 per 1,000 by 2005.

The cellular mobile market is expected to surge to over 50 million subscribers by 2005 from the present 36 million users. The country has 52 million cable TV customers.

The United States is India's largest investment partner, with total inflow of U.S. direct investment estimated at $3.7 billion in 2003. Proposals for direct foreign investment are considered by the Foreign Investment Promotion Board and generally receive government approval.

Automatic approvals are available for investments involving up to 100% foreign equity, depending on the kind of industry. Foreign investment is particularly sought after in power generation, telecommunications, ports, roads, petroleum exploration/processing and mining.

India's external debt was $112 billion in 2003, up from $105 billion in 2002. Bilateral assistance was approximately $2.62 billion in 2002-03, with the United States providing about $130.2 million in development assistance in 2003. The World Bank plans to double aid to India to almost $3 billion over the next four years, beginning in July 2004.

Some facts:GDP: $576 billion (2003); $648 billion (2004 est.).

Real growth rate: 8.2% (2003).Per capita GDP: $543 (2003); $602 (2004 est.).Natural resources: Coal, iron ore, manganese, mica, bauxite, chromite, thorium, limestone, barite, titanium ore, diamonds, crude oil.Agriculture: 22.7% of GDP. Products--wheat, rice, coarse grains, oilseeds, sugar, cotton, jute, tea

Industry: 26.6% of GDP. Products--textiles, jute, processed food, steel, machinery, transport equipment, cement, aluminum, fertilizers, mining, petroleum, chemicals, computer software.Services and transportation: 50.7% of GDP.

Trade: Exports--$62 billion; agricultural products, engineering goods, precious stones, cotton apparel and fabrics, gems and jewelry, handicrafts, tea. Software exports--$12.5 billion. Imports--$76 billion; petroleum, machinery and transport equipment, electronic goods, edible oils, fertilizers, chemicals, gold, textiles, iron and steel. Major trade partners--U.S., EU, Russia, Japan, Iraq.

India GDP growth rate

A growth rate of above 8% was achieved by the Indian economy during the year 2003-04 and in the advanced estimates for 2004-05, Indian economy has been predicted to grow at a level of 7 %.

Growth in the Indian economy has steadily increased since 1979, averaging 5.7% per year in the 23-year growth record. (However in comparison to many East Asian economies, having growth rates above 7%, the Indian growth experience lags behind.)

Many factors are behind this robust performance of the Indian economy in 2004-05. High growth rates in Industry & service sector and a benign world economic environment provided a backdrop conducive to the Indian economy.

Another positive feature was that the growth was accompanied by continued maintenance of relative stability of prices. However, agriculture fell sharply from its 2003-04 level of 9 % to 1.1% in the current year primarily because of a bad monsoon.

Thus, there is a paramount need to move Indian agriculture beyond its centuries old dependency on monsoon. This can be achieved by bringing more area under irrigation and by better water management.

The Three Sectors of Indian Economy

Agriculture

More than 58% of country's population depends on agriculture, a sector producing only 22% of GDP. The agriculture and allied sector witnessed a growth of 9.1% in 2003-04, which fell steeply to 1.1% in the current fiscal year.

Favorable monsoon facilitated an impressive growth rate of 9.6% in 2003-04 on the back of negative growth in the preceding year. However, deficient rainfall from the southwest monsoon is estimated to have caused a significant decline in kharif crops production in the current year.

While looking at some of the agricultural products, one finds that India is the largest producer of Tea, jute and jute like fibre. India is not only the largest producer but also largest consumer of tea in the world. India accounts for around 14% of the world trade in tea.

Indian tea is exported in various forms such as bulk tea, packet tea, tea bags, instant tea etc, to more than 80 countries of the world. Among livestock cattle and buffalo are found maximum in India. Indian total milk production is highest in the world. India has also the privilege of having the 1st rank in total irrigated land in area terms in the world.

Among cereals production, India is placed third, having second largest production in wheat and rice and the largest production in pulses. However, the full potential of Indian agriculture as a profitable activity hasn't been realized yet. Agriculture upliftment will not only benefit farmers and a large section of the rural poor,

but also will give fillip to overall growth of the economy through the backward and forward linkages of agriculture with the rest of the economy.

Priority must be given to livestock's & fisheries, horticulture, organic farming, commercial crops and agro-processing, as these are the potential areas of high growth. Further, rationalization of minimum support price regime and introduction of other risk- mitigation measures,

improvements in rural infrastructure are essential for sustaining high agricultural growth. It is conceived that reforms in legislations, strengthening R&D and improvements in post harvest management technologies will give a further boost to Indian agriculture.

While acceleration in agriculture growth to 4 - 4.5% is imperative, even with such growth rate; share of agriculture in total GDP is likely to reduce further. Therefore, there is a need to absorb excess agricultural labour in other sectors, notably industry. Rapid growth of agro - processing industry close to the agricultural production

centers can bring about this shift without moving people from rural to urban areas. Also, public investment in agriculture needs to be augmented, especially in rural infrastructure, irrigation, and agricultural research & development. Better access to institutional credit for more farmers, is also high on priority list.

The New trade policy gives focus to agriculture and all the hurdles in Indian agriculture will be crossed gradually.

Industry

Index of industrial production which measures the overall industrial growth rate was 10.1% in October 2004 as compared to 6.2% in October 2003. The double digit in IIP was aided by a robust growth of 11.3% in the manufacturing sector followed by mining and quarrying and electricity generation.

But industrial production saw a decline in Dec 2004 when IIP dipped to 8 %. Thus one of the critical challenges facing Indian economic policy consists in devising strategies for sustained industrial growth.

Final phase-out of the MFA and India's conformity with the international intellectual property system from Jan 1st Jan 2005, have been two significant developments in the world of commerce & industry.

Textile industry is the largest industry in terms of employment economy from the current US $37 billion to $ 85 billion by 2010 creation of 12 million new jobs in the textile sector and modernization & consolidation for creating a globally competitive textile industry.

With the phasing out of quota regime under MFA, from Jan 1st 2005, developing countries including India with both textile & clothing capacity may be able to prosper.

Automobile sector has demonstrated the inherent strengths of Indian labour and capital. The pharma industry and the IT industry are two sunrise sectors for India. Among the sectors that have experienced the greatest transformation in India, the pharmaceutical is perhaps the most significant.

India's WTO involvement during the last decade has encouraged our pharma companies to adopt a strategy of R & D based innovative growth. Indian pharma exports were 14000 crore Rupees & accounts for more than a third of the industry's turnover. Apart from manufacture of drugs, the pharma industry offers huge for outsourcing of clinical research.

A vast pool of scientific and technical personnel & recognized expertise in medical treatment & health care are India's strength, India can take advantages of its strength once patent protection is given to the result of the researches.

By participating in the international system of intellectual property protection, India unlocks for herself vast opportunities in both exports as well as her potential to become a global hub in the area of R & D based clinical research outsourcing, particularly in the area of bio-technology.

The three main sub sectors of industry viz Mining & quarrying, manufacturing, and electricity, gas & water supply recorded growths of 5%, 8.8% and 7.1% respectively.

Apart from infrastructure, particularly adequate and reliable power supply at reasonable cost and transportation facilities, there is need for stepped up investment in manufacturing. Industry needs to grow rapidly not only to boost the overall growth rate in the economy but also to generate gainful employment for the existing unemployed, as well as the new entrants.

In a diverse range of industrial activities, several Indian firms have succeeded in getting integrated into global production chains and realized rapid growth of exports. This experience suggests that with appropriate scale, investment and technology, rapid industrial growth is indeed possible.

Services

Service sector has maintained a steady growth pattern since 96-97, except into a fall in 2000-01. Trade hotels, transport & communications have witnessed the highest growth of level 10.9% in 2004,

followed by financial services (With a overall growth rate of (6.4) % and community, social & personal services (5.9)% of all the three sectors, services have been the highest contributor to total GDP growth rate.

While in most parts of the developed world, the services sector's share of employment rose faster than its share of output in India there has been a relatively slow growth of jobs in the service sector.

This is primarily because of the rise in labour productivity in services in sectors such as information technology that is dependent on skilled labour. Growth in tourism and tourism - related services such as hotels, holds a large potential for employment generation.

IT enabled services, such as Business Process Outsourcing have been growing rapidly in the recent past and will continue to rise. However, the skill requirements for such services are of a specialized nature and the emergence of somewhat inexplicable protectionist tendencies in some developed countries is a disturbing trend.

However, it is important that India sees BPO in a larger perspective, than the Internet, as India's share is just $ 3.5 billion in December 2004 compared to the global market of US $ 178 billion.

Also India outsourcing companies need to work more closely with their customers. In the complex BPOs, customers would like to have hybrid processes to control value. Indian companies need the right mix of domain expertise and process expertise, further, mere knowledge of English is not sufficient;

management skills are also needed. Education for the offshoring industry needs to be given impetus too.

The beginning of New Year saw Tsunami, a worst ever disaster, which killed thousands of people in India, Sri Lanka, Indonesia & Thailand. Many of them were international tourists. The disaster was expected to have a negative impact on India's tourism in terms of large-scale cancellations of tourists to India

but nothing of that sort was seen. In fact, tourist arrivals in India rose 23.5 percent in Dec 2004 and tourist arrivals crossed 3 million mark for the first time in 2004.

Part 5 Economic Reforms and Growth Prospects in India