India country overview

The economy of India

Geography, People, Culture, and Economic Profile

India information index

Industry of India


India’s manufacturing sector is characterized by a remarkable diversity. The vast majority of industrial laborers are employed within a multitude of small-scale artisanal businesses. These enterprises, often run by households and including activities such as spinning, weaving, pottery, metalwork, and carpentry, primarily cater to the needs of their local village communities.

Despite the prevalence of these small enterprises, the bulk of India’s manufacturing output and value addition is dominated by mechanized factory operations. A significant portion of these factories, particularly those involved in the production of capital goods such as basic metals, machinery, fertilizers, and heavy chemicals, are state-owned, managed by either the central or regional governments. In addition, the private sector boasts thousands of manufacturers, ranging from large diversified industrial groups to smaller entities. Notably, the steel industry features prominent private players like Tata Iron and Steel Company (Tata Steel) in Jamshedpur, which has been operational since 1911 and stands as one of the most successful entities in the sector. Indian companies have also established turnkey operations in regions such as the Middle East, East Africa, and Southeast Asia, which are handed over to local management after a predefined period. However, foreign investment in Indian industry has been relatively restrained, historically hindered by overregulation (which has since been eased) and restrictions on foreign majority ownership.

Textile manufacturing, which encompasses cotton, jute, wool, silk, and synthetic fibers, is the largest employer within the manufacturing sector. Most large urban centers host at least one cotton mill. Jute milling is particularly concentrated in the cities along the Hugli (Hooghly) River, near Kolkata. Beyond textiles, there are numerous processing facilities for agricultural and mining outputs, which are typically smaller, seasonal operations situated near their source of primary production. These facilities handle various processes, such as cotton ginning, oil extraction, peanut shelling, sugar refining, foodstuff drying and cold storage, and the initial crushing and smelting of ores. Industries producing consumer goods, although widespread, are primarily clustered in major cities. To promote regional development and reduce urban congestion, state governments have established numerous industrial parks offering incentives like affordable land and tax reductions. These initiatives have generally been successful.

Heavy industries, especially metallurgical plants like iron and steel mills, are strategically sited either near raw material sources or coal reserves, with the decision influenced by the balance of material requirements and transport costs. India benefits from several locations, particularly in the Chota Nagpur Plateau, where there is an abundance of coal near high-quality iron ore reserves. Close to the Kolkata market, this plateau has emerged as a central hub for heavy industry, hosting a network of chemical and engineering firms. Additionally, the production of heavy transport equipment, including locomotives and trucks, is concentrated in this region.


The Indian banking sector, which is predominantly under government regulation and ownership, is robust and sophisticated. The cornerstone of this system is the Reserve Bank of India (RBI), established in 1935, which is tasked with overseeing the issuance of currency, managing India’s foreign exchange reserves, and steering the nation’s monetary and credit systems. The landscape of commercial banking underwent a significant transformation with the nationalization of the 14 largest banks in 1969, followed by additional nationalizations in 1980, transferring the majority of commercial banking into the public domain.

To address the financial needs of small-scale farmers and tenants, the Indian government set up regional rural banks in 1975, effectively mitigating the dominance of local usurers known for charging exorbitant interest rates, which perpetuated the indebtedness of their clients. Additionally, the central government has instituted banks designed to extend credit facilities that bolster various industrial sectors and international commerce. The presence of numerous foreign bank branches within India, along with the establishment of Indian bank offices overseas, reflects the global footprint of India’s banking sector.

While stock exchanges in India may not have the same level of influence as their counterparts in wealthier capitalist nations, they still play a crucial role in the country’s financial infrastructure. Located in several major cities across India, these exchanges facilitate capital mobilization through securities, operating within a regulatory framework set forth by the Ministry of Finance.


India’s international trade volume is relatively modest considering the country’s extensive and varied economic landscape. Additionally, India consistently experiences a significant trade deficit, which is further exacerbated by a considerable influx of illicitly imported goods, predominantly luxury items.

India’s export portfolio is diverse, with no single category of goods dominating the market. Historically, gems and jewelry, particularly those destined for the Middle Eastern markets, have been at the forefront in terms of export value. This was closely followed by the textile sector, benefiting from India’s abundant and cost-effective labor force, and the leather industry, which thrives due to both the affordable labor costs and the substantial cattle population. Nevertheless, since the dawn of the 21st century, engineering goods have surged to the forefront of India’s export economy. Meanwhile, the export of chemicals, chemical products, and agricultural commodities remains significant, although they do not surpass the gems and jewelry sector. On the import front, India’s acquisitions are varied, encompassing crude oil and its derivatives, precious metals, and a range of chemicals and chemical products.

India’s trade connections span the globe. Historically, the United States and the former Soviet Union have been prominent export destinations for India, with the latter frequently engaging in barter agreements. The United States continues to be a key market for Indian exports, while China (including Hong Kong) and the United Arab Emirates have also emerged as important trade partners. The principal sources for imports into India are China, Saudi Arabia, the United Arab Emirates, and the United States.


India, like other nations with a socialist heritage, possesses a comprehensive bureaucratic framework that has played a pivotal role in its socio-economic advancement. The nation’s notable economic progression has been substantially supported by its vast reservoir of engineering expertise. Government-managed construction agencies, with the Central Department of Public Works being the most prominent, have been instrumental in executing major infrastructure projects. These include the development of railways, national and state highways, ports, hydroelectric and irrigation schemes, as well as the construction of state-owned industrial facilities and hospitality establishments.

Since the 1990s, the private sector has made a significant impact on the expansion of service industries, particularly with the rise of a formidable computer software and services sector predominantly situated in the metropolitan regions of Bengaluru and Hyderabad. Capitalizing on its substantial English-speaking population, India has positioned itself as a cost-effective alternative for U.S.-based telecommunications firms and other corporations in setting up customer support call centers. Furthermore, India continues to be a preferred destination for tourists from Europe and the Americas, with the tourism industry serving as a vital contributor to the country’s foreign exchange earnings.

Labour and taxation

A significant portion of the formal employment sector is unionized, leading to a notable incidence of strikes that can be extensive in duration. Numerous unions are connected to a variety of central trade union organizations that are recognized and regulated by the government of India. These organizations, some of which boast memberships in the millions, maintain affiliations with the nation’s major political parties.

In terms of taxation, the Indian fiscal framework involves multiple tiers of government, including federal, state, and local authorities. At the federal level, the Union government is responsible for the collection of income taxes, customs duties, and excise tariffs, in addition to administering value-added taxes such as the sales tax. State governments derive a substantial portion of their revenues from stamp duties associated with the issuance of various licenses and from taxes on agricultural income. Meanwhile, local governmental bodies secure their funds through property taxes and charges for the provision of services.

Transportation and telecommunications

Upon achieving independence, India possessed a transportation infrastructure that was notably advanced compared to other sizeable postcolonial territories. In the subsequent years, India consistently expanded upon this foundation. The railway network, in particular, played a crucial role in forging national unity during the early years of independence. While railways have maintained their importance in freight transportation, there has been a discernible shift towards greater reliance on roadways and vehicular transport. India’s transportation landscape is remarkably diverse, encompassing a wide array of methods ranging from traditional human carriers and animal-drawn vehicles—of which millions of bullock carts are still in use—to cutting-edge aviation technologies. Each mode of transport has carved out its own domain where it is not only preferred but, in some cases, remains the only viable option for the movement of people and commodities.

The telecommunications industry has long been under the purview of the state, and despite the sector’s liberalization in the 1990s, the government maintains significant influence via state-owned or affiliated entities, as well as the Department of Telecommunications. While urban regions exhibit a high density of telephone service, the national average of main lines per capita remains low. Access to telephone services is notably absent in numerous rural communities. In urban centers, cellular telephone services are offered by an array of private companies. The state exerts considerable control over television and radio broadcasting through the Ministry of Information and Broadcasting. The quantity of personal computers in the country, although substantial in absolute terms, is modest when considered in relation to the population size. Internet services are subscribed to by many, but cybercafes play a crucial role in providing online access to a significant segment of the population, particularly in urban locales.

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