INDIAN ECONOMY

FEATURES WITH REFERENCE TO ITS STRUCTURE

Presented By:
Gaurav Bansal Naveen Kumar Neeraj chadawar Nishanth P Sanat Kumar Shounak Mondal

Overview of Indian Economy

 India is the second largest country in terms of

population  Has 16% of the world s population and roughly has 12% of the world s land  Fourth largest economy in terms of GDP as per IMF estimates of 2006  Indian economy is extremely diversified, ranging from technology to agriculture

 Indian economy is mixed economy  Agriculture contributes only 23% of GDP but

employs approx 65% of workforce

 Major problems regarding Indian economy

Inadequate employment opportunity, Inequality in socio economic status, Poverty, Poor infrastructure, Fiscal deficit and a large amount of Non Performing Assets

 India has changed from public sector dominance

to increasingly liberalized system, with both private and foreign players.  Post liberalization competition has increased in the Indian market.  Some key strengths that India can leverage upon vast pool of Human Resources, Natural Resources, Entrepreneurial talent  Indian economy achieved a growth rate of above 7% in recent past

 Robust growth of the economy due to high

growth rate of service sector and continued maintenance of relative stability of price and above all a strong Balance of Payment (BOP)  Dec 19,2003 foreign exchange reserves crossed the US $100 billion mark  It was in the range of $130 billion to $140 billion in 2005.  The reserves has touched a new high, $250 billion in 2007

 Growth momentum in exports has been

maintained, registered a growth 20% in the last few years  Recent RBI stats shows that the country has again slipped into current account deficit

Five Year Plans

FIRST PLAN ( 1951-56) 3.6 4.2 2.7 2.05 4.83 SIXTH PLAN SEVENTH PLAN EIGHTH PLAN NINTH PLAN TENTH PLAN 5.54 6.02 6.02 5.35 7.20

SECOND PLAN ( 1956-61) THIRD PLAN ( 1961-66) FOURTH PLAN ( 1969-74) FIFTH PLAN ( 1974-79)

Indian Economy

Different Phases in Indian Economy

Independence to 1980
 Most of the population was employed in agriculture ,

and most of those people were very poor  First prime minister, Jawaharlal Nehru introduced the five-year plans in year 1951--agreed that strong economic growth and measures to increase incomes and consumption among the poorest groups were necessary goals for the new nation  During this period the economy grew at an average rate of about 3.1 percent a year in constant prices  Industry grew at an average rate of 4.5 percent a year, compared with an annual average of 3.0 percent for agriculture

Factors contributed to the slowdown of the economy after the mid-1960s

 Structural Deficiency: Such as need of

institutional change in agriculture and inefficiency of much of the industrial sector  War with China in 1962 and with Pakistan in 1965 and 1971  Drought in 1965,1966,1971,1972  First world oil crises in 1973-74

Growth since 1980

 Economy grew at an annual rate of 5.5 %,

Industry gerw at an annual rate of 6.6% and agriculture gerw at an rate of 3.6%.  High rate of investment was the major factor in improved economic growth  India's primary sector, including agriculture, forestry, fishing, mining, and quarrying, accounted for 32.8 percent of GDP in FY 1991

Major reforms between 1980 to 1990

 kilowatt-hours of electricity generation

increase more than fiftyfold  Steel production rose from 1.5 m tons to 14.7 m tons  Life expectancy increased from 27 years to 59 years  Availability of food grains per capita rose from 395gm per day in FY 1950 to 466 gm in FY 1992

Economic reforms: post 1991 era

The 1991 crisis  Pressure generated by the large and persistent fiscal deficit, foreign exchange crisis, high terrific, huge deficit in balance of payment.  Disruption in Eastern Europe and Gulf crisis in 1990

Stabilization measures
Three important measures taken to stabilize the economy were  devaluation of the currency  cut in govt. expenditure to bring about reduction in budget deficit  elimination of price controls and cutting down subsidies on agricultural input and products

Economic Indicators from 1991

 The Indian economy has undergone substantial

changes since the introduction of economic reforms in 1991.  Three main components namely, liberalisation, privatisation and globalisation  Various measures like deregulating the markets and encouraging private participation; trade liberalisation; dismantling the restrictions on domestic and foreign investments; reforming the financial sector and the tax system, etc.

 Net National Product (NNP) at factor cost (at

1993-94 prices) increased from 0.5 per cent in 1991-92 to 6.3 per cent in 1999-2000
 It increased to 8.8 percent in 2003-04 at 1999-

2000 prices.
 Similarly, per capita NNP increased from -1.5 per

cent to 4.4 percent and then to 7.0 percent during the same period

 Gross National Product (GNP) at factor cost (at

1993-94 prices) increased from 1.1 per cent in 1991-92 to 6.2 percent in 1999-2000.
 It increased to 8.7 percent in 2003-04 at 1999-

2000 prices.
 Gross Domestic Product (GDP) at factor cost ( at

1999-2000 prices) has increased from 4.4 percent in 2000-01 to 7.5 per cent in 2004-05.

Reforms for Growth

Exchange Market Reforms  The Eighth Five Year Plan had envisaged exchange rate reforms as part of the general trade policy reforms.  Permission to EEFC (Exchange Earner s Foreign Currency) which accounts holder to use these funds for business related current account transactions.

Reforms in the Foreign Investment Regime

 Stimulus has been provided by streamlining the

procedures for foreign investment.

 FIPB ( Foreign Investment Promotional Board)

has been revamped to make the rules and regulations pertaining pertaining to foreign investment more transparent.

Reforms in the Infrastructural sector

 significant progress in telecom sector by

involving private sector in value added services

 Establishment of TRAI in 1997  Improvement in public transport system

Traffic and Trade Reform  In 1995, India has initiated a wide ranging program me of trade liberalization and economic deregulation.  Principle objectives are :
 maximize benefits from expanding global

market opportunities,  providing access to essential raw material, intermediates, components, consumer goods and capital good required

SECTORS
 External  Agriculture  Industries  Infrastructure  Education  Services

Analysis of sector
 External Sector
1.

2. 3. 4. 5.

India in 2009 witnessed a surge of FIIs hedging on the nation s growth prospects, and bringing in over $17.46 billion in domestic equities(Data Acc. To SEBI) India s share of the global FDI increased from 0.78% in 2005 to 2.45% in 2008. India s foreign exchange reserves reaches at $278.7 billion as of February 5, 2010(Data Acc. to RBI) India s exports registered growth of 11.5% in January 2010 to $14.34 billion, from $12.86 billion a year in 2009 India s balance of payments surplus in July-September 2009 was at $9.42 million, up from $4.7 billion during the same period in 2008

Industrial sector
 Industrial sector contributes 27% of the

country s GDP  IIP(Index of Industrial production ) grew by 6.9% to 8.4% in the year 2005  Manufacturing sector being the driving force behind the growth and contribute around 80%.  Highest growth rate of IIP was achieved in year 95 with 13% and lowest of 2.7% in year 2001

Industrial sector
Automobile Industry Gems and jewellery Textile Industry Steel industry
Witnessed a growth of 15 to 20 % during a period of 2003-2008

India is largest consumer if gold followed by china Export increased from 15 to 22 % in last 3 years

This industry has registered an export of more than $10.1 billion in recent years

This industry has shown growth due to development of Infrastructure in India and China

Agriculture Sector
 More than 65% of country s population

depends upon this sector and contribute around 23% of GDP  Rice , Wheat Pulses and oil seeds dominates the agriculture production in india  India is the largest producer of tea and jute  India s total milk production is highest in the world

Trends in Agriculture sector

 Food Grain Production  Plantation crop  Poultry and Fisheries  Agricultural credit  Irrigation

Infrastructure Sector
 Power

Today country s power generation reaches the mark of 583.8 billion kilowatt hour and increases at an rate of 7-8% per year  Railways Route length of 63221 Km and fleet of 7000 passengers and 4000 goods trains  Aviation Many private airlines doing a business in India as they projected highly lucrative market in terms of growth  Telecommunication India now uses digital technology in telecommunication

Elementary Education
 National Program of Nutritional Support to

Primary Education (School Meal Programme) Under this programme meal is provided free of cost to the children of class 1st to 5th  Secondary Education- Indian at present 1.2 lacks institutions  Higher Education-Indian has one of the largest Higher Education System .

Services sector
 Service sector now accounts for more than

half India s GDP  Rise in service sector s share in GDP marks structural shift in Indian Economy and take it closer to the fundamental of developed economy  Service sector share in GDP has grown from 43.69 to 55 % from 1991 to 2005-06

UNIQUE FEATURES OF INDIAN ECONOMY

 Low per capita income  Low standard of living  High poverty  Unequal income distribution  Dominance of Agriculture  Existence of rich resources

Inadequate capital formation Unemployment and underemployment Technological backwardness Infrastructural Inadequacies Mixed economy The parallel Economy (Black Money) In 2006, the most recent Global Financial Integrity study, shows that the average amount stashed away from India annually during 2002-06 is $27.3 billion (about 136,466 crore). It means that during the fiveyear period the amount stashed away is 27.3x5=136.5 billion (about 692,328 crore)
     

Structural Similarities
 Largely agrarian in early years  Agrarian turns to majorly Industrial and then

to Services  Today services is major part of Indian GDP

1950 2011 AGRICULTURE ( 60% ) AGRICULTURE ( 24% ) INDUSTRY ( 13% ) INDUSTRY ( 25% ) SERVICES ( 27% ) SERVICES ( 51% )

Dissimilarities
India turned swiftly from agrarian to services mainly because of two reasons 1. Due to communication technologies demand for services has increased 2. Earlier less international trade means higher share for industry but to increase in international trade products are made based on competitive advantage

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