World Energy Outlook 2007

CHAPTER 14
POLITICAL, ECONOMIC AND DEMOGRAPHIC CONTEXT
HIGHLIGHTS
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India had the fourth-largest economy in the world, after the United States,
China and Japan in PPP terms in 2006. At market exchange rates, India’s
GDP in 2006 was the thirteenth-largest. India’s economic growth
has trended upwards over the last three decades, averaging 7% per year
since 2000. It was 9.7% in 2006, up from 9% in 2005, mainly thanks to
a surge in private investment and in manufacturing. Among the world’s
twenty largest economies, only China grew faster than India in the two
years to 2006.
Service activities account for a large share of India’s economy, compared
with most other developing countries. In 2005, they contributed 54% of
GDP; industry contributed 27% and agriculture 19%. Despite the
relatively small contribution of agriculture to GDP, nearly 60% of the
workforce is still employed in farming.
Services and manufacturing are expected to remain the main drivers of
India’s economic development. Productivity in India is very low, so the
potential for further growth through productivity gains is substantial. The
future pace of productivity and GDP growth hinges on structural and
business reforms, fiscal discipline and efforts to remove barriers to trade and
investment. Infrastructure improvements will be essential to higher
productivity in all sectors.
Poverty remains a huge challenge for India, despite the recent rise in average
incomes. Average per-capita GDP (in PPP terms) in 2006 was $3 736 –
about an eighth of the OECD average. Per-capita income varies markedly
across the country: in Bihar, the poorest state, it is about a tenth of that in
Goa, the richest state. Economic growth will reduce poverty but acceptable
income distribution will require strong policies to assist the rural sector and
the poorest people in urban areas. Greater access to cleaner cooking fuels
and electricity must form part of these policies.
India is home to around 1.1 billion people, about 17% of the world’s
population. Today, it is the world’s second most populous country, after
China. It is expected to have the largest population in the world soon after
2030. More than 70% of the population live in rural areas – a higher
proportion than in most other Asian countries. The rate of population
growth appears to have slowed in many large cities, but the urban
population is still expected to nearly double by 2030. The number living
in slums today is some 160 million people.
Chapter 14 - Political, Economic and Demographic Context
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