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India: Country and Foreign Investment

Executive Summary

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 centurries AD saw a flowering of Indian science, art, and culture. The Delhi Sultanate in the 10th and 11th centuries followed a Moorish invasion; later the Mughal dynasty ruled India from 1500 to 1800.

European powers began to infiltrate India from the 17th century onwards, initially for trading purposes. 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.

A (mostly) non-violent independence movement led by Ghandi and Nehru brought about the creation of a separate, independent Indian state in 1947, although a substantial part of the peninsula became Pakistan. Wars between India and Pakistan led to the eventual creation of Bangladesh out of what had been East Pakistan. Both India and Pakistan 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 elements, titanium ore, chromite, natural gas, diamonds, petroleum and limestone.

The population is approximately 1.2 billion, second only to China, and is growing at 1.34% per year. The two largest cities are Delhi, the political capital, with 22m inhabitatnts, and Mumbai (Bombay), the commercial capital, with 20m inhabitants.

There are twenty official languages in India, testifying to its fragmented past; Hindi is the most widely spoken, being used by 41% 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 Manmohan Singh and he has been in power since 2004.

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.

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 at 5.6% in 2012 and inflation has been a problem. With low GDP per head of only USD3,900 (2012 est.) there is ample scope for further rapid growth.

The currency is the Indian rupee. Currently (March 2013), 1 Indian rupee = 0.01845 US dollars (54 rupees to the dollar).



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