India's population is estimated at more than 1.1 billion and is growing at 1.3% a year. It has the world's 12th largest economy--and the third largest in Asia behind Japan and China--with total GDP of around $1 trillion ($1,000 billion). Services, industry, and agriculture account for 55%, 27%, and 18% of GDP respectively. Nearly two-thirds of the population depends on agriculture for its livelihood. 700 million Indians live on $2 per day or less, but there is a large and growing middle class of 325-350 million with disposable income for consumer goods.

India is continuing to move forward with market-oriented economic reforms that began in 1991. Recent reforms include liberalized foreign investment and exchange regimes, industrial decontrol, significant reductions in tariffs and other trade barriers, reform and modernization of the financial sector, significant adjustments in government monetary and fiscal policies, and safeguarding intellectual property rights.

Real GDP growth for the fiscal year ending March 31, 2007 was 9.4%, up from 9.0% growth in the previous year. Growth for the year ending March 31, 2008 is expected to be between 8.5-9.0%. Foreign portfolio and direct investment inflows have risen significantly in recent years. They have contributed to $255 billion in foreign exchange reserves by June 2007. Government receipts from privatization were about $3 billion in fiscal year 2003-2004, but the privatization program has stalled since then.

Economic growth is constrained by inadequate infrastructure, a cumbersome bureaucracy, corruption, labor market rigidities, regulatory and foreign investment controls, the "reservation" of key products for small-scale industries, and high (although declining) fiscal deficits. The outlook for further trade liberalization is mixed. India eliminated quotas on 1,420 consumer imports in 2002 and has incrementally lowered non-agricultural customs duties in recent successive budgets. However, the tax structure is complex, with compounding effects of various taxes.

The United States is India's largest trading partner. Bilateral trade in 2006 was $32 billion. Principal U.S. exports are diagnostic or lab reagents, aircraft and parts, advanced machinery, cotton, fertilizers, ferrous waste/scrap metal, and computer hardware. Major U.S. imports from India include textiles and ready-made garments, Internet-enabled services, agricultural and related products, gems and jewelry, leather products, and chemicals.

The rapidly growing software sector is boosting service exports and modernizing India's economy. Software exports crossed $28 billion in FY 2006-2007, while business process outsourcing (BPO) revenues hit $8.3 billion in 2006-2007. Personal computer penetration is 14 per 1,000 persons. The cellular/mobile market surged to 140 million subscribers by November 2006. The country has 54 million cable TV customers.

The United States is India's largest investment partner, with a 13% share. India's total inflow of U.S. direct investment is estimated at more than $9 billion through 2006. Proposals for direct foreign investment are considered by the Foreign Investment Promotion Board and generally receive government approval. Automatic approvals are available for investments involving up to 100% foreign equity, depending on the kind of industry. Foreign investment is particularly sought after in power generation, telecommunications, ports, roads, petroleum exploration/processing, and mining.

India's external debt was $155 billion in 2006-2007, up from $126 billion in 2005-2006. Foreign assistance was approximately $3 billion in 2006-2007, with the United States providing about $126 million in development assistance. The World Bank plans to double aid to India to almost $3 billion a year, with focus on infrastructure, education, health, and rural livelihoods.