Economic Clusters in India.

Abstract

The primary sector has its biggest industry, agriculture, in Punjab. During the agriculture revolution which began in 1967, agriculture in Punjab,  got the boost it needed in order to grow. The measures used, had  adverse long-term effects  of  an increasing rate of farmer suicide, depletion of underground water and the degradation of environmental and human health. . Prime Minister Narendra Modi, is has introduced its own 'Green Revolution', to solve the issues challenging  the primary sector. The automotive industry in Chennai, is the largest sub-section of the secondary sector. The sector is now facing environmental pressure and a slump in growth . To revive this ailing sector Modi has introduced, 'Make in India'. Which is an initiative, to woo foreign investors to move their production facilities to India. Benagaluru is India's home of the IT sector, the backbone of the tertiary sector. This sector facing labor shortages and lack of investment. FDI caps and restrictions have eased, some even abolished and laws for IPRs have been tightened.

Table of Contents

1. Background and Introduction        

1.1 Introduction        

1.2 Background        

1.2.1 GDP        

1.2.2 GDP Per Capita        

1.2.3 Growth Rate        

1.2.4 GDP Composition and Labor Force        

1.2.5 FDI        

2. Primary Sector        

2.1 Background        

2.2 Challenges and Issues        

2.3 Future Prospects        

3. Secondary Sector        

3.1 Background        

3.2  Challenges and Issues        

3.3 Future Prospects        

4. Tertiary Sector        

4.1 Background        

4.2. Challenges and Issues        

4.3 . Future Prospects        

7. Conclusion        

8. References        

1. Background and Introduction

1.1 Introduction

This research essay explores the economy of India, by looking at its three economic sectors. This paper further discusses the composition of each sector, the challenges and issues that the sector is facing and the future prospects of the individual sector concerned. The text will look at the economic cluster of each sector. The primary sector is clustered in the Northern State of Punjab, where agriculture is widespread; the automotive industry in Chennai is analyzed in order to understand the secondary sector and tertiary sector is examined through Bengaluru, where it is the cluster for the  IT sector.

The reason why these locations are chosen is straightforward.  Each location, may it be Punjab, Chennai or Bengaluru contains the largest cluster for that certain industry. In addition, the industry chosen is the largest in their respective sectors. Punjab, has the largest agriculture cluster in India, and the agriculture industry is largest in industry in the primary sector. The largest industry in the secondary sector is the automotive industry, it's largest concentration is located in Chennai. The tertiary sector's most productive industry is the IT sector, its biggest cluster is in the provincial capital of Bengaluru. The biggest cluster of epitomizes challenges and the prospects the sector, it enables the comprehension of the seventh largest economy, by looking at each cluster individually.

1.2 Background

India is country of about 1.3 billion people. Started in the Indus valley as a small civilization, it is now a dynamic economy, and the seventh largest in the world. The nation is one of the G-20 major economies, a member of BRICS  and SAARC. It currently has a large young  population, low dependency ratio, enjoys high savings and investment rates and is increasingly integrated to the economy.

1.2.1 GDP

India has one of the largest economies in the world. The overall trend has been in an increase in gross domestic product. In 2011, India's GDP was at US$ 1,843.02 billion, due to, uncertainty in the global economy and policy paralysis, it decreased in 2012 to US$ 1,835.82. From  2013 onward the GDP has been increasing, the GDP was at US$1,875.16 billion. Due to the election in 2014, there was new optimism in the economy, and the GDP rose to US$ 2,049,50 billion, while in the fiscal year of 2014, which ends in March 2015, the new policies rolled out by Prime Minister Narendra Modi, has secured investors confidence in the economy and it is reflected in the further increase in the gross domestic product, to US$ 2,306.02 billion.^[1] 

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Figure 1 India's Nominal GDP, 2011-2015. Source: IMF.

1.2.2 GDP Per Capita

The GDP per Capita in India's economy has followed the same trend as its GDP. Starting at the level of US$ 1,521.92, it then decreases, US$1,495.95. In 2013, the GDP per Capita started increasing to 1,508.16. The elections bringing in optimism in the economy increased the per capita to US$ 1,626,98. The new policies and investors confidence, enabled the per capita income to increase sharply, which is now at the level of US$ 1,808.41.

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Figure 2 GDP Per Capita of India, 2011-2015. Source: IMF.

1.2.3 Growth Rate

Ever since the mid-2000s, India has generally been the seconds fastest growing economy in the world, after China. In 2011, the growth rate was 6.64%. When the GDP slumped so did the growth rates, however, it didn't lose it No. 2 position, while it stood at 5.08%. In 2013, the growth rate increased to 6.90%. In the last quarter India, became the fastest growing economy at 7.17%, while in 2015, keeping momentum India is expected to grow at 7.46%.

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Figure 3 Growth Rate of India's GDP, Percentage Change , From 2011-2015. Source IMF.

1.2.4 GDP Composition and Labor Force

India's main economic driver is the tertiary, or the services, sector. Which the majority contributor to the GDP. However, the composition of GDP and its labor force has huge discrepancies. The majority of India's population, 47%, is employed in the primary sector, however they contribute only 18% to the GDP. The secondary  of the economy employs 25% of the labor force, and is responsible for 31%, of the whole GDP, indicating that there is some increasing returns in that sector. The tertiary sector composes 51% of the GDP, but only employs 28% of the 500 million or so workers. Please see charts below for more information.

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1.2.5 FDI

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Figure 6 FDI By Sector, 2011-2014. Source: 2014 , Government of India (GOI)

The figure indicated above illustrates the FDI situation in India, from the fiscal year (FY) 2011 to the fiscal year of 2013.^[2] The graph describes the Foreign Direct Investment, in India's sectors where FDI was previously allowed. FDI is clearly seen to be decreasing in recent times. due to the restrictions in FDI policy. however this is before Modi got elected. In the FY of 2014, Modi introduced his "Make in India', that includes new policies and incentives for FDI. For more information on the FDI incentives please look at Section 4.3.

2. Primary Sector

2.1 Background

 India classifies its primary sector as agriculture, farming, mining, sericulture, aviculture, forestry and related activities. Ten percent of all export earnings come  from this trade. The top goods demanded by other countries include: Basmati rice, wheat, cereals, spices, fresh fruits, dry fruits, buffalo beef meat, cotton, tea, coffee and other cash crops. The Middle-East, South East Asia, and East Asia, have the largest demands for Indian goods in the primary sector. Even though, this sector of the economy is responsible for 47% of the employment, it's contribution to the GDP has been decreasing in recent years.  (Please see Graph Below)

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