Agriculture provides the livelihood for over 60% of the population. These agricultural workers produce one-quarter of the gross domestic product (GDP). The country is rich in mineral, forest, and energy resources, and its ample reserves of iron ore and coal provide a substantial base for heavy industry. Hydroelectric and nuclear installations supply a rising proportion of India's power needs. The government is actively promoting oil exploration and development.

Under a planned development program, after independence the government was the driving force behind the nation's industries. Recently, however, India has placed greater emphasis on private enterprise to stimulate growth and modernization.

Political instability in the late 1980s and oil price shocks resulting from the Persian Gulf War (1991) led to an economic crisis in early 1991, but swift reform measures taken by the newly elected government proved highly successful. Inflation declined from 13.1% in 1991 and 1992 to 8.6% in 1993 and 1994. However, inflation stood at 14% in 1998.

The domestic economy grew at an annual rate of about 6% during 1993–96. By 1997, however, the steep rise in imports signaled that reforms were needed in order to keep up the economic recovery. By 1998, the annual growth rate was estimated at 6.8%.

Economic growth began to slow significantly in 2000–01, reflecting both the global economic slowdown and also weak agricultural growth in India. In 2002–03, however, growth recovered from under 5% to over 7%, largely due to a recovery in agriculture.