July 31, 2013

[INDIA: AN ECONOMIC PERSPECTIVE] The Indian economy is the third largest in the world in terms of purchasing power. According to the Global Investment Bank, Goldman Sachs predictions, by 2035 India would be the third largest economy of the world just after US and China. It will grow to 60% of size of the US economy. This booming economy of today has to pass through many phases before it can achieve the current milestone of 9% GDP. The history of Indian economy after independence can be broadly divided into three phases: From 19471964-65 (Phase 1), 1965-1991 (Phase 2) and 1991-Till Date(Phase 3). Phase 1 (Industrial Growth): Under Jawaharlal Nehrus leadership, state-centred economic planning reigned. Combating economic stagnation and extreme poverty through state driven policies were of primary importance. The top-down economic model helped sustain relatively stable economic growth for reason India was undergoing a phase of rapid industrialisation and recovering from years of economic suppression under the British.

Phase 2 (Economic Planning): After the demise of Pandit Jawaharlal Nehru, the Indian state saw the leadership of the likes of Indira Gandhi, Lal Bahadur Shastri and Rajiv Gandhi. India was under a state of war since 1962 to 1971 with China and Pakistan. For this, India had to buy ammunitions and armaments for the defence in warfare. Due to this the country underwent into a state of foreign debt and loans from the International Monetary Fund. This lead to the Current Account Deficit to rise affecting the steep fall in the currency exchange, in-house production higher tax rates and various other economic disparities. To recover from this burden of interest debt and increasing deficits, India saw the planning commission being formed for the reforms. Phase 3 (LPG): Under the prime minister P.V. Narsimha Rao, the then finance minister Mr. Manmohan Singh brought in the economic reforms commonly known as the Liberalization, Privatization and Globalization policies. Trade liberalization, financial liberalization, tax reforms and opening up to foreign investments were some of the important steps, which helped Indian economy to gain momentum. Under these reforms, India saw the growth in sectors like FMCG, entertainment, agriculture, Information technology along with the Industrial growth. Since then the Indian economy has come a long way. The Gross Domestic Product (GDP) at factor cost, which was 2.3 % in 1951-52 reached 6.5 in the financial year 2011-2012 BRIC: The term was coined by Jim O'Neill in a 2001 for the Big Four countries of Brazil, Russia, India and China which are all deemed to be at a similar stage of newly advanced economic development. In 2010, South Africa was also included in this group, making it BRICS, due to the emergence of this country in the globe as yet another powerful economy. Indias GDP Growth Rate: Since 2001, India saw a GDP growth rate of 1.79% on an average. India is the worlds tenth largest economy and the second most populous. The most important and the fastest growing sector of Indian economy are services

Moreshwar Dani

July 31, 2013

[INDIA: AN ECONOMIC PERSPECTIVE]

Human Development Index in India: According to UN Indias Human Development Report, India is in the medium human development category and is ranked 134 among 187 countries. Having been shown a considerable potential in its performance on economic indicators such as GDP, India needs to improve its position on the HDI to capitalize the potential offered by the GDP. Below data shows the HDI trends since 1981. Human Development Index Year 2011 2010 2009 2008 2007 2006 2005 2000 1995 1990 1985 India 0.547 0.542 0.535 0.527 0.523 0.512 0.504 0.461 0.437 0.410 0.380 Medium human development 0.630 0.625 0.618 0.612 0.605 0.595 0.587 0.548 0.517 0.480 0.450 South Asia 0.548 0.545 0.538 0.532 0.527 0.518 0.510 0.468 0.444 0.418 0.389 World 0.682 0.679 0.676 0.674 0.670 0.664 0.660 0.634 0.613 0.594 0.576
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Moreshwar Dani

July 31, 2013

[INDIA: AN ECONOMIC PERSPECTIVE] 1980 0.344 0.420 0.356 0.558

Marginal Propensity to consume: India has shown an upward trend in the level of expenditure and the consumer confidence is on a rise. The country ranks second in the GDP growth rate calculated on the basis of per-capita purchasing power capacity. Below is the trend of consumption expenditure in India since 2002.

References: Source: International Human Development Indicators UNDP website, Countries Section http://www.tradingeconomics.com/india/consumer-spending http://www.tradingeconomics.com/india/gdp-growth http://mospi.nic.in/Mospi_New/upload/NSS_Report_538.pdf http://www.lse.ac.uk/IDEAS/publications/reports/pdf/SR010/sibal.pdf http://economic-research.bnpparibas.com/Views/DisplayPublication.aspx?type=document&IdPdf=21917 http://www.mapsofindia.com/india-economy.html http://ccs.in/ccsindia/policy/money/studies/wp0028.pdf

Moreshwar Dani