Slide 1: Indian Economy Opportunities Unlimited “It is difficult to say what is impossible – for the dream of yesterday is the hope of today and the reality of tomorrow” Agriculture and Service Sector Slide 2: 19 years
8% GDP growth Defining Economic Growth : Defining Economic Growth Economic growth is the increase in the amount of the
Goods and services produced by an economy over time.
Growth rate of GDP:
[GDP(2007) - GDP(2008)]/ GDP(2007) × 100 Economic Growth : Economic Growth Sectorial Growth Model : Sectorial Growth Model Economy mainly divided into three sectors:
Total growth can be split into productivity gains within the sectors plus relocation gains. Drivers of Growth : Drivers of Growth Growth Expectations : Growth Expectations What Is Agro Economics? : What Is Agro Economics? Economics is often defined as the study of resource allocation under scarcity.
Agronomics, or the application of economic methods to optimizing the decisions made by agricultural producers, grew to prominence around the turn of the 20th century.
The field of agricultural economics can be traced out to works on land economics. Agriculture : Agriculture Largest producer of
Tea-India accounts of 14% of world trade in tea
Highest in terms of total milk production in the world.
Third largest producer of cereals in the world :
wheat, rice and pulses. Agricultural Sector: Important for economic growth and reducing poverty : Agricultural Sector: Important for economic growth and reducing poverty 70% of population, 75% of poor are in rural areas.
Agriculture: main source of livelihood for 60% of population.
Contributes about 20% to GDP.
Recorded growth rate of 3.4 per cent in 2008-09 The role of Agriculture in the Indian economy : The role of Agriculture in the Indian economy The national income (GDP).
Economic planning, growth and development. Three Goals of Agricultural Development : Three Goals of Agricultural Development 1. Achieve 4% growth in agriculture and raise incomes. Increasing productivity (land, labor), diversification to high value agriculture and rural non-farm by maintaining food security.
2. Second goal is sharing growth (equity): focus on small and marginal farmers, lagging regions, women etc. On lagging regions, focus on Eastern India and other rainfed areas.
3. Third is to maintain sustainability of agriculture by focusing on environmental concerns. The post independence of Indian agriculture : The post independence of Indian agriculture Phase I: 1947-64 (Development of infrastructure for scientific agriculture)
1.Establishment of fertilizer and pesticide factories.
2. Establishment agricultural universities and agricultural Research Institutions.
(Example: The Central Rice Research Institute, Cuttack, and The Central Potato Research Institute, Shimla).
3. Imports of foods and Grains. The post independence of Indian agriculture : Phase II: 1965-1985(maximising the benefits of irrigation and infrastructure)
1. Reorganization and strengthening of agricultural research, education and extension.
2. Provide farmers assured marketing opportunities.
3. Establishment of The National Bank for Agriculture and Rural Development (NABARD).
4. Introduction of Sixth Five Year Plan period (1980-85)
5. A phenomenon christened in 1968 as the Green Revolution. The post independence of Indian agriculture The post independence of Indian agriculture : Phase III: 1985-2000 (concurrent attention to conservation,
cultivation, consumption, and commerce).
Introduction of organizational innovations like Technology Missions to rapid rise in production of pulses, oil seeds, vegetables, fruits, and milk.
Greater attention paid to Rain-fed areas and wastelands.
Decline in public investment in irrigation and infrastructure. The post independence of Indian agriculture The post independence of Indian agriculture : Phase IV: 2001 Onwards( Period of technology extension and
40 per cent of the farmer’s want to quit farming for others alternative option.
The agricultural decline is taking place.
Unfair International trade increases the prices of food grains.
changes in rainfall, temperature, and the sea level due to global warming affects agriculture . The post independence of Indian agriculture The Economic Survey of India (2006-07) says: : Agricultural growth is pegged at 2.7 per cent.
Total food grains production in 2006-07 estimated at 209.2 metric tonnes (MT).
Total water availability in reservoirs up 10 per cent to 120.2 billion cubic meters (BCM) at the end of monsoon 2006. The Economic Survey of India (2006-07) says: The Economic Survey of India (2006-07) says: : Fishing, aquaculture and allied activities made for 5.3 per cent of the agricultural gross domestic product (GDP).
Production of wheat and other rabi crops increased with the rains in February 2007 -- sugarcane, cotton, and jute to set new records. The Economic Survey of India (2006-07) says: More facts and figures : More facts and figures According to the economic data for the financial year 2006-07, agriculture accounts for 18% of GDP. About 43 % of India's geographical area is used for agricultural activity. It accounts for 8.56 % of India’s exports.
Though the share of Indian agriculture in the GDP has steadily declined, it is still the single largest contributor to the GDP and plays a vital role in the overall socio-economic development of India. Agriculture and the Five Year Plans : Agriculture and the Five Year Plans Objectives:
Increase in production.
Manage population pressure on land.
Equitable redistribution of rural income. Pattern of Investment : Pattern of Investment Inclusive Growth: Agriculture : Inclusive Growth: Agriculture Concerns in Agriculture
Deceleration in growth from 3.5% during 1981-97 to 2% during 1997-2005. Decline in yield growth.
Land and water problems, vulnerability to world commodity
prices, farmers’ suicides, 45% of farmers want to leave agri but no where to go.
Disparities in growth across regions and crops: growth rate
declined more in rainfed areas. Key Issues and Challenges : Key Issues and Challenges Slow down in agricultural GDP growth
From 3.5% in mid-80s to 90s to less than 2% in mid-90s to 2000s,
Poorest states (MP,Orissa, Rajathan), growth less than 1%
Lead to widening rural-urban income gaps.
Low agricultural productivity.
Crop yields are low relative to other countries, disparity in yields across states.
Increasing natural resource degradation
Soil erosion, salinity, alkalinity, declining ground water levels.
Partly due to fertilizer, power and irrigation policies. Deficits in Agriculture Growth : Deficits in Agriculture Growth Six deficits in agriculture:
(a) Land and water management deficit.
(b) Investment, credit and Infrastructure deficit.
(c) Research and extension (technology) deficit.
(d) Market deficit.
(e) Institutions deficit.
(f) Education/skill deficit. Present Status : Present Status 55 years of planning.
The much applauded Green Revolution.
Sufficient food and surplus only since 2002. Present Status : Present Status Monsoon dependent.
Decline in agro-investment.
Failure of land reforms.
Rural population outburst.
Unbalanced agro development. Key points of Agricultural sector in Interim Budget 2009-2010 : Key points of Agricultural sector in Interim Budget 2009-2010 Country’s agriculture outlook is encouraging.
Agriculture grew by 3.7 per cent per annum.
Plan allocation for farm sector hiked 300 percent in past five years.
Agriculture credit has been increased three-fold to Rs.2,50,000 cr.
Farm debt worth Rs.65,300 crore waived.
Corpus of Rural Infrastructure Development Fund hiked to Rs.14,000 crore from Rs.5,500 crore.
Bharat Nirman, the time-bound plan for building rural infrastructure receives Rs 40,900 crore. Future Prospects : Future Prospects The Second Green Revolution?
Sustainable Development? “ We should have targeted 10 per cent agricultural growth which would have helped remove poverty in the long run rather than 3 per cent at present.”- Dr. P.Chidambarm. Service Sector in India : Service Sector in India Slide 30: Service industry The service sector is going through almost revolutionary change, which dramatically affects the way in which we live and work.
Service sector accounts more than half of India's Gross Domestic Product. The rise in service sector's share in GDP marks a structural change. India’s Service sector at a Glance : India’s Service sector at a Glance Rapidly increasing two-way trade in IT and ITES and other high-end services sub-sectors has been a critical factor in India’s economy. ‘Information Technology and IT Enabled Services can do for India what automotives did for Japan and oil for Saudi Arabia.’
-McKinsey & Company. Services as a share of GDP over time : Services as a share of GDP over time Service Sectors in India : Service Sectors in India Trade
Hotels and Restaurants
Other Transport & Storage
Communication (Post, Telecom)
Dwellings, Real Estate
Public Administration, Defense.
Other Services Economic Prospect of India’s Service Sector : Economic Prospect of India’s Service Sector Growth in high-end services like IT–ITES has the potential to generate significant spin-offs.
Financial services and transport infrastructure can be expected to expand capabilities and improve productivity.
The services sector has a major role to play in absorbing India’s rapidly growing labour force.
4. Improvements in the delivery of education and healthcare services, particularly in rural areas, are vital for sustainable growth. THE DRIVERS : THE DRIVERS IT–ITES – the star performer.
Telecommunications – a dynamic enabler.
Finance – work in progress.
Transport infrastructure – vital for growth.
Airports and air services.
other commercial services – a strong growth area. IT–ITES – the star performer : IT–ITES – the star performer The rapid expansion of Information Technology–Information Technology Enabled Services (IT–ITES) has had a significant impact on the broader Indian economy, by generating substantial export earnings and tax revenue; creating significant numbers of high-quality jobs; and precipitating
productivity-enhancing technology diffusion to other industries and the public sector. Slide 37: A booming IT industry recognized all across the world
Vast workforce which is
-Educated, English speaking,
India graduates 100,000 engineers each year
a strong force for technical support. Business Process Outsourcing: Why India? Direction of IT & ITES Exports : Direction of IT & ITES Exports IT and ITES Export Trends : IT and ITES Export Trends Telecommunications : Telecommunications 20% Growth rate(crossed 10 millions).
Fifth largest network in the world.
People below poverty line uses cell phones.
Maximum Public telephone Booths.
Any operator the right to provide any access service using any technology Growth in Other Service sector : Growth in Other Service sector Trends and Composition : Trends and Composition Trends and Composition : Trends and Composition Reforms in Service sectors : 1. Stock Exchange: Stock market liberalization.
2. Multi National Insurance companies.
3. Multi National banks.
4. Foreign Universities Reforms in Service sectors Services: Before and after Liberalization : Services: Before and after Liberalization Before liberalization Services was the residual sector drawing refugees from agriculture
Between 1996 and 2005- the triple impact of India’s external liberalization, domestic economic reforms and the rise of a global market for skilled services facilitated by information technology makes itself felt, share of services in India’s GDP grew from just over 40% to about 54%.
Rapid growth of services in the economy, specially, in the external sector- facilitates less dependent on the India’s relatively poor infrastructure than manufacturing.
China, which has a far higher proportion of its economy in manufacturing, and has emerged as the global hub for labor intensive manufacturing, has much better infrastructure than India. China’s better infrastructure facilitated entrepreneurship in the manufacturing sector. Overview and Recent Developments : Overview and Recent Developments India seen in last 10 odd years as the emerging professional services hub of the world
India’s competitive edge in professional services is compared with China’s prowess as a low cost global manufacturing hub.
the services sector scenario in India is complex
characterized by uneven development in different types of services and across regions. Growth of Services : Growth of Services An important feature of India’s growth - skewed towards services -described as jobless growth.
Share of agriculture in the Indian economy declined rapidly.
Share of employment in agriculture has remained the same- increasing share of services in the GDP has not been accompanied by services claiming a larger share of employment in the decade of the 1990’s. Growth in Services : Growth in Services growth in output in services in India in recent times has mostly come from the rapid development of skill intensive services in the IT and professional services segments- oriented towards the external market
large proportion of services in India are a part of the informal economy and the official employment figures might understate the actual size of the services workforce
there is a lot of cross-over between services and agriculture sector laborers, i.e. many workers spend part of the year as agricultural workers and the rest of the year working in some service job such as informal retail and construction work
There has been some debate on the repercussions of this skill biased development of service sector jobs Slide 49: ‘No big international company can be without an India strategy’ By
Debojit Roy – H66
Sritanu Das Mahapatra – H57
Abhisek Sahu – H3
Krishnakant Pandey – H25
Biswajit Ghosh – H12 © 2009 AIMS PGPM-H08