According to the International Monetary Fund, India's nominal GDP stands at US$1.53 trillion, making it the tenth-largest economy in the world. With purchasing power parity(PPP), India's economy is the fourth largest in the world at US$4.06 trillion. With its average annual GDP growing at 5.8% for the past two decades, India is also one of the fastest growing economies in the world. However, India's per capita income is US$1,000, and the country ranks 138th in nominal GDP per capita and 129th in GDP per capita at PPP among all countries of the world.
Until 1991, all Indian governments followed protectionist policies that were influenced by socialist economics. Widespread state intervention and regulation caused the Indian economy to be largely closed to the outside world. After an acute balance of payments crisis in 1991, the nation liberalised its economy and has since continued to move towards a free-market system, emphasizing both foreign trade and investment. Consequently, India's economic model is now being described overall as capitalist.
With 467 million workers, India has the world's second largest labour force. The service sector makes up 54% of the GDP, the agricultural sector 28%, and the industrial sector 18%. Major agricultural products include rice, wheat, oilseed, cotton, jute, tea, sugarcane, and potatoes. Major industries include textiles, telecommunications, chemicals, food processing, steel, transport equipment, cement, mining, petroleum, machinery and software. By 2006, India's external trade had reached a relatively moderate proportion of GDP at 24%, up from 6% in 1985. In 2008, India's share of world trade was 1.68%; India was the world's fifteenth largest importer in 2009, and the eighteenth largest exporter. Major exports include petroleum products, textile goods, gems and jewelry, software, engineering goods, chemicals, and leather manufactures. Major imports include crude oil, machinery, gems, fertiliser, chemicals.
Averaging an economic growth rate of 7.5% during the last few years, India has more than doubled its hourly wage rates during the last decade. Moreover, since 1985, India has moved 431 million of its citizens out of poverty, and by 2030 India's middle class numbers will grow to more than 580 million. Although ranking 51st in global competitiveness, India ranks 16th in financial marketsophistication, 24th in the banking sector, 27th in business sophistication and 30th in innovation, ahead of several advanced economies. With seven of the world's top 15 technology outsourcing companies based in India, the country is viewed as the second most favourable outsourcing destination after the United States. India's consumer market, currently the world's thirteenth largest, is expected to become fifth largest by 2030. Its telecommunication industry, the world's fastest growing, added 227 million subscribers during 2010–11 its automobile industry, the world's second-fastest growing, increased domestic sales by 26% during 2009–10, and exports by 36% during 2008–09.
Despite impressive economic growth during recent decades, India continues to face a number of socio-economic challenges. India contains the largest concentration of people living below the World Bank's international poverty line of $1.25/day, the proportion having decreased from 60% in 1981 to 42% in 2005. Half of the children in India are underweight and 46% of children under the age of three suffer from malnutrition. Since 1991, economic inequality between India's states has consistently grown: the per capita net state domestic product of the richest states in 2007 was 3.2 times that of the poorest. Corruption in India is perceived to have increased significantly, with one report estimating the illegal capital flows since independence to be US$462 billion. Driven by consistent growth, India's nominal GDP per capita has steadily increased from U$463 in 2001 to U$1,176 by 2010, yet it remains lower than those of other Asian developing countries such as Malaysia, Thailand, Indonesia, and Iran.
According to a 2011 PwC report, India's GDP at purchasing power parity will overtake that of Japan during 2011 itself and that of the United States by 2045. Moreover, during the next four decades, India's economy is expected to grow at an average of 8%, making the nation potentially the world's fastest growing major economy until 2050. The report also highlights some of the key factors behind high economic growth — a young and rapidly growing working age population; the growth of the manufacturing sector due to rising levels of education and engineering skills; and sustained growth of the consumer market due to a rapidly growing middle class. However, the World Bank cautions that for India to achieve its economic potential, it must continue to focus on public sector reform, transport infrastructure, agricultural and rural development, removal of labor regulations, education, energy security, and public health and nutrition.