Section 1 India at a Glance After the government of Jawaharlal Nehru (1889–1964) formed the first Planning Commission in 1950 in an attempt to efficiently allocate resources to various sectors of the economy, Indian real GDP grew at an annual rate of 3.5 percent through 1980; a relatively modest level of growth for an emerg- ing economy, it would unfairly become known as the “Hindu rate of growth.” Coming to power in 1984 after Indira Gandhi’s assassination, Rajiv Gandhi (1944–1991) accelerated reforms initiated by his mother, including measures to reduce the industrial-licensing system known as the “License Raj,” a reduc- tion in tariffs on imports, and a reduction in corporate taxes and income taxes. While Gandhi’s efforts to spur reform were seen as a positive step, the reforms did not fundamentally alter the status quo of the Indian economy, known as a “Caged Tiger,” built upon the ideals of Fabian socialism. In the late 1980s, an increase in external debt from 10 to 15 percent of Gross National Income (GNI) to 20 to 25 percent of GNI, combined with persistent and rising government fiscal and current account deficits, led to a balance of payments crisis, which left India dangerously short of foreign exchange reserves and at risk of default on its short-term debt obligations. After the June 1991 election of the Congress Party’s Narasimha Rao (1921–2004),COPYRIGHTED the third government MATERIAL in 18 months, the crisis was stemmed following a double devaluation of the rupee and the emergency airlift of 47 tonnes of gold to be held as collateral at the Bank of England in order for India to raise $600 million. Rao’s finance minister, Manmohan Singh (born in 1930), quickly pushed India toward a more market-based economy by introducing a wide array of economic reforms, including: virtually eliminating the “License Raj”; reducing tariffs on imports; allowing a greater level of foreign direct investment; loosening foreign-exchange controls; lowering income taxes; decreasing public expenditures; and reducing India’s fiscal deficit. 1 c01.indd 1 11/6/2013 4:24:03 PM 2 Portfolio Investment Opportunities in India As the reform process continued, Indian real GDP grew at a rate of 6.4 percent through the remainder of the 1990s and at an accelerated rate of 7.2 percent during the 2000–2010 period. Post-2010 Developments As of late-2013, India’s GDP growth rate had decelerated, as India experi- enced an unsupportive growth mix of high fiscal deficits and declining pri- vate investment since the credit crisis of 2008 and a slowed pace of economic reform amid political gridlock. As of late-2013, Morgan Stanley & Co. Research estimated that India’s real GDP growth in 2013 and 2014 would be approximately +5.1 percent and +6.1 percent, respectively. In August 2012, with the Indian economy in the midst of a period of slowing growth, Prime Minister Manmohan Singh reiterated his commit- ment to overcoming the lack of political consensus on reforms that would “increase the pace of economic growth, take steps to encourage new invest- ment, and improve the management of Government finances.” In September 2012, PM Singh defended the government’s decisions dur- ing the month to reduce government subsidies by hiking diesel prices and to reinitiate efforts to further open India’s fragmented retail sector to greater foreign direct investment, potentially opening the Indian market to certain global multibrand retailers. The Indian Subcontinent The Indian subcontinent represents a peninsular landmass of the Asian continent occupying the Indian Plate and extending into the Indian Ocean, bordered on the north by the Eurasian Plate. The region is known as a subcontinent because its geography and geology are distinct from the rest of the Asian continent. The Indian subcontinent consists of four countries: Pakistan, Bangladesh, India, and Sri Lanka. The subcontinent is surrounded by three bodies of water: the Bay of Bengal, the Indian Ocean, and the Arabian Sea. Historically, the Indian subcontinent was known as Bharat in ancient (pre-1000 c.e.) times and Hindustan (Persian for “Land of the Hindus”) in medieval times, following the presence of the Mughals. The region came to be known as British India, or simply India, during the British Raj period. Until the end of the nineteenth century, the Indian subcontinent along with Southeast Asia was collectively known as the East Indies by European colonists and traders. The Indian subcontinent was referred to as Hither India (India Citerior) while Southeast Asia was known as Further India (India Ulterior). c01.indd 2 11/6/2013 4:24:03 PM India at a Glance 3 India’s Political System As of late-2013, India was composed of 28 states and 7 union territories, the latter of which are ruled directly by the national government rather than by a state legislature. Topography of India India contains a veritable kaleidoscope of terrains. Its overall area encompasses just over one million square miles, yet the country offers a rich topographi- cal diversity of varied climatic and ecological zones. The country possesses the highest snowbound mountain range in the world, the Himalayas to the north; the wettest spot on the planet, the Garo Hills of Meghalaya on the east coast; humid tropical forests in the southwest; the fertile Brahmaputra valley in the center; the low-lying mangrove swamps of the Sunderbans; and the Thar Desert with its ambient sand dunes toward the west. India’s terrain underscores its mystic and ethereal qualities, as prehistoric crystalline rocks and lava created plateaus and rivers that flow through the uneven western lands, forming picturesque lagoons and backwaters, and tra- versing cliffs and coastal vistas, all of which set a tantalizing backdrop for the aspirations and development of human society. Sanskrit and the Languages of India Sanskrit is the oldest language in the world. The word Sanskrit literally means “perfected language” or “language brought to formal perfection.” The Sanskrit alphabet is called devanagari and literally means “cities of the gods.” As of late-2013, the Indian constitution recognized 22 official languages, and the Indian census recorded over 200 different mother tongues. States whose boundaries are based on languages include: Kerala for Mayalam speakers, Tamil Nadu for Tamil speakers, Karnataka for Kannada speakers, Andhra Pradesh for Telegu speakers, Maharashtra for Marathi speakers, Orissa for Oriya speakers, West Bengal for Bengali speakers, Gujarat for Gujarati speakers, Punjab for Punjabi speakers, and Assam for Assamese speakers. India’s Kingdoms and Empires Although isolated from the rest of Asia by oceans on three sides and moun- tain ranges to the north, India has experienced a near-constant influx of differing cultural influences, entering primarily via the far northwest. As a result, India reflects wide regional diversity in cultures, languages, foods, and customs. c01.indd 3 11/6/2013 4:24:03 PM 4 Portfolio Investment Opportunities in India Prehistory (30,000–1200 B.C.) Paleolithic (primitive stone tools) sites in India are scattered across the Indian subcontinent and date from 30,000 to 10,000 b.c. The earliest Neolithic sites have been dated to 7000 b.c. and represent a transition toward agriculture, the domestication of animals, wheel-thrown pottery, and a more sedentary population. The Nal culture and the Kulli culture of this era were precursors to the Indus Valley civilization, also known as the Harappan culture. The Harappan culture represents the subcontinent’s first attempt at urbanization. Early History (1200–600 B.C.) The Vedic culture and its accompanying Vedic texts mark the beginning of Indian history (defined as the beginning of written accounts) and represent the first historical influx of foreign influence, in this case migrants known as Aryans thought to originate from Central Asia. During this Vedic period, the caste structure and the beginnings of the subcontinent’s second and perma- nent urbanization emerged. The Rise of States, Kingdoms, and Empires (600 B.C.–1200 A.D.) As the urbanization of the Ganges River Valley progressed, kingdoms, known as the Mahajanapadas began to form. Magadha, a Mahajanapada based in present-day Bihar, West Bengal, and Bangladesh, launched the subcontinent’s first experiment in imperial administration, the Maurya Empire. While sev- eral empires followed, including the Gupta Empire and the Buddhist Pala Empire, the Indian subcontinent was largely characterized by regional king- doms that waxed and waned, with none attaining the level of the Maurya’s uniform authority throughout the subcontinent until the British Raj. The Islamic Sultans and Mughals (1200–1800) Originating from Afghanistan, a Turkish, Afghan, and Arab army founded the Islamic sultanates that introduced Muslim influence throughout the culture of the Indian subcontinent. Another foreign invader, the Mughals, originating from the Central Asian steppes but at the time ruling a kingdom in Afghanistan, reinforced this Muslim influence, and the fusion of cultures occurring during this period was physically manifested through original styles of art and architecture. Arrival of the European Traders (1500–1947) Portuguese, English, French, and Dutch traders arrived on the Indian subconti- nent to capitalize on the trade in spices already traversing the Arabian Sea and Indian Ocean. This trade grew to include other raw materials and eventually, the European powers expanded from their trading “factories” to acquire land and c01.indd 4 11/6/2013 4:24:03 PM India at a Glance 5 revenue rights. The British Crown maneuvered to become the dominant European presence and subsequently came to govern the entire Indian subcontinent. Post-Independence India (1947–Present) After a decades-long effort notably marked by Mahatma Gandhi’s nonvio- lent and civil disobedience demonstrations, the independent nation of India was born as the world’s largest democracy.