Indian Economy had seen many ups and downs in its earlier stages and presently exhibits a galloping rise from 6% GDP in 1985 to that of 24% by the end of 2006. The pre-colonial Indian economy was self-sufficient in every sense of the term with trade relations the world over. This stability was distorted during the colonization period when the total Indian share in the world income fell to 3.8% in 1954 from a respectable 22.3% in 1700. The condition was resolved to a better position with the post-Independence Five Year Plans which brought about a fast paced industrial development in the country. The development was such that the GDP rise was a high as 9% in 2005-06 from a mere 2.5% in 1951-52. Economic liberalization introduced by Man Mohan Singh in 1991 heralded the economic reform movements which include tax reforms, financial liberalization and trade liberalization.

Following socialist-inspired policies, Indian economy stresses the ownership of the sectors by the state government. Indian economy has seen tremendous growth in the recent years and has positioned itself at the twelfth position among the largest world economies. Although agriculture lies at the backbone of the economy, the total contribution of cities and towns accounts to 2/3rds of the total economy. India's trade share in that of the world is 1% in which software, jewellery, textiles, etc. are the chief export items. The list of import items includes chemicals, crude oil, machineries and so on.

In the recent years, the Indian economy has exhibited an astonishing growth. The best example is shown by the inflation target rising to 11%, the decade's highest level ever set by the RBI. Besides, the nuclear treaty signed with US would bring about a reduction in the demand for oil.

Investment has become a major requisite for the development of the Indian economy. Airports, Railways, roads and ports are seen as potent areas, investment wherein will bear prolific returns.

The economic scenario of India has seen the following growth trends over the years:

A growth rate of around 7% has minimized poverty to an extent but still a major part of the work is to be done.
The Indian Government's structural transformation has been successful in overcoming the growth restraints that it had been facing for some time now.
The service sector is growing at a rate of 11.18% since 2007 and the industrial sector has a fair stand on 10.63% growth. The manufacturing sector doesn't lag behind and has significantly shown a major leap in the growth rate from 8.98% to 12% as in 2006.
The formation of Gross capital in GDP jumped to 35.9% in 2006 from 22.8% in 2001.

The Indian Economy has to cope up with some major challenges in front of it such as population explosion, unemployment, poverty and the vast difference between the growth rates of rural and urban regions.

Some of the reforms that need to be undertaken to restore a stable growth to the Indian Economy are:

Proper maintenance of fiscal discipline
Directing public expenditure to the improvisation of the health and education sector.
Frequent reforms for the Labour Laws so as to create more employment opportunities.
Development of the agricultural sector by adopting new technology and better methods of irrigation so that its dependence on the monsoon is gradually reduced.
Privatization of some of the public sector banks.