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India: Country and Foreign Investment

Executive Summary

This page was last updated on 11 Dec 2018.

Classical Indian culture was formed under a series of civilizations in the last three thousand years BC; the Gupta dynasty in the 4th to 6th centuries AD saw a flowering of Indian science, art, and culture. The invasion of Muslim armies caused great destruction, though things settled down into the Delhi Sultanate in the 10th and 11th centuries; later the Moghul dynasty ruled India from 1500 to the late 18th century.

European powers began to infiltrate India from the 17th century onwards, initially engaging in trade. The British East India Company ran what amounted to its own government in India during the 18th century and the first part of the 19th century. By degrees Britain became the dominant power in India, and by the middle of the 19th century India was counted as a part of the British Empire.

An overwhelmingly non-violent independence movement led by Mahatma Gandhi and Nehru came into fruition in 1947. Two states were created: secular, Hindu-majority India and at that point secular but Muslim-dominated Pakistan. Somewhat unwisely, the latter was split into West and East Pakistan, separated by more than 1,000 miles of Indian territory.

Tensions rose between India and both parts of Pakistan. Then, aggrieved by the continued dominance of West Pakistan, East Pakistan led to secession of the East, war, millions dead and the creation of Bangladesh. Tensions remain high between India and Pakistan, especially in divided Kashmir. Both countries have nuclear weapons.

The climate of India varies from tropical in the south to temperate in the hillier north. India has rich agricultural resources, and its mineral reserves include coal, iron ore, manganese, mica, bauxite, rare earth metals, titanium ore, chromite, natural gas, diamonds, petroleum and limestone.

The population is more than 1.3 billion, second only to China, and is growing at 1.34% per year. The two largest cities are Delhi, which contains the capital New Delhi, with 19 million inhabitants, and Mumbai (Bombay), the commercial centre and chief port, with 20 million.

There are 22 official languages in India, testifying to its fragmented past; Hindi and its allied dialects are used by 44% of the population. For political, economic and commercial communication, English is very widely used. Literacy is only 61%, largely due to the exclusion of women from formal education in many regions.

India is a federal republic divided into 28 states and seven union territories. There is a bicameral parliament. The president and vice-president are elected by the members of the legislature; but real power resides with the prime minister, who is elected by the members of the largest political party. Currently the prime minister is Narendra Modi of the nationalist BJP; he has been in power since 2014.

The legal system is based on English common law and precedents play a large part in the judicial process, as they do in other common law countries. There is a Supreme Court; justices are appointed by the president and remain in office until they reach the age of 65.

India's economy was held back for a long time by protectionist, autarkic tendencies verging on cronyism. Liberalization began in the 1990s and large parts of the economy can now be described as open. Although agriculture is still the dominant sector, incentive policies have underpinned the growth of IT and other technology-based industries. Outsourcing has been a major growth sector.

GDP growth has averaged 7% for the last ten years, and the economy bounced back strongly from the financial crisis to clock up 10% growth in 2010. The deficit remains on the high side 2012, though inflation, which was a recent problem, has settled down; it was at 3.3% in November 2018. With low GDP per capita PPP of only USD6,427 (December 2017) there is ample scope for further rapid growth.

The currency is the Indian rupee. Currently (March 2013), 1 Indian rupee = 0.0139 US dollars (72 rupees to the dollar).



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