INDIAN ECONOMY : INDIAN ECONOMY India: An Introduction : India: An Introduction Population: 1.13 billion (2007)
Federal State with 28 States and 7 Union Territories
GDP USD1.2 trillion (2007)
External Trade – USD 528 billion (2007)
Forex Reserves – USD 247 billion (end Nov 2008)
Market capitalisation (as end Nov 2008): USD 560 billion (50% of GDP). Economic Indicators : Economic Indicators Current Situation Overview : Current Situation Overview Significant all around improvement after turbulent period (1998-99)
5.7% GDP growth estimated 1999-00 and forecast at 6.3% next year
Inflation, driven by higher fuel prices, up from 4.5%
Expected to stabilize at 6.5%
Industrial environment improves in 1999-00, IIP growth around 8% levels
Stronger consumer demand, tentative industrial demand, rising exports
Cement, automotive, home goods & services are the fast growing segments
Corporate sector reports brisk top line growth of >20% and a slightly slower bottom line growth of 18%
Margins under pressure due to the mild over capacity in most industries
Resurgence in Portfolio Flows (FII) during 2000, FDI flows expected to pick up speed with greater clarity in policy Current Situation Overview : Current Situation Overview Foreign Debt Under Control at less than 24% of GDP
External debt service ratio at < 2% of GDP
Large part of debt 40% concessional and short term part is only 5% of total debt
Foreign Currency Reserves rise to USD 35 bn (8 months import cover)
Rupee Depreciation only 2.17% in 1999-00, another 2% since April 2000
Annual rate of depreciation estimated to be around 4.5-5%
Political situation shows greater signs of stability
Wider dispersion amongst partners makes the coalition less vulnerable Current Situation Overview (Concerns) : Current Situation Overview (Concerns) Fiscal deficit at around 6% continues to be the main concern
Successful completion of at least one privatization program
Approach to cutting back subsidies
Investment demand yet to materialize
The much awaited infrastructure boom
Step-up In new industrial capacities
FDI flows to gather momentum (rise to more than 30% of approvals)
Water scarcity and drought conditions in several states
Is a concern though it is too early to assess impact
Large government attention needed to manage the crisis Indian Economy – on a swing : Indian Economy – on a swing Growing Global Engagement; merchandise exports of over
US$105 Bn and imports of US$156 bn. Both growing at over
Surging Foreign Exchange Reserves > US$165 bn.
Fll investments of US$14 Bn and FDI of US$ 8 Bn in 2006-
70% of the companies with FDI yielding higher profitability
than that of the parent company.
Some of the largest infrastructure creation in
the world (Golden Quadrilateral -5,400 kms)
Planned investment of about USD 300 bn
during the next 10 years for creation of
expressways and roads
Formation of Special Economic zones (SEZ),
more than 300 zones planned during the next 3
years through public-private partnership Current Economic Policies : Current Economic Policies Centers around strong domestic industry but trade barriers are being dismantled in accordance with commitments
Increased importance on housing and rural industrialization
Product patents in place, import curbs lifted on several commodities
Attempts to create a rural industrial base (around small industry)
Investments guided by competitive advantages/ economic considerations rather than licensing restrictions / allowances
Strong industrial growth averaging 7% in the last five years
Significant progress in opening up telecom and power sectors
Privatization of PSUs (GOI holding upto 26%), closure of sick units, repeal of the Urban Land Ceiling Regulations, etc.
Significant capital flows generated from 1991 to 1998
FDI - $15 Bn; Portfolio (FII) - $12Bn;
FCY reserves increased from $2Bn in 1991 to over $35Bn as of April’2000 Growth Targets & Imperatives : Growth Targets & Imperatives Need to target GDP growth of 8-10%
Liberalize and ease domestic consumption and investment
India ranked 41st in competitiveness
Strengthen the contribution from the export markets
Promote and channel private and foreign investments into infrastructure
Required investment of $120Bn over next five years to sustain planned growth
Current domestic savings of 24% needs to be augmented by foreign investments ~ $10Bn p.a.
Maintain financial and currency stability
Controlled moderate inflation
Cap on fiscal deficit, Bill on fiscal responsibility soon
Clearer focus on planned government capital expenditure Agriculture : Agriculture India ranks second worldwide in farm output. Agriculture and allied sectors like forestry, logging and fishing accounted for 16.6% of the GDP in 2007, employed 60% of the total workforce and despite a steady decline of its share in the GDP, is still the largest economic sector and plays a significant role in the overall socio-economic development of India.
India is the largest producer in the world of milk, cashew nuts, coconuts, tea, ginger, turmeric and black pepper. It also has the world's largest cattle population: 193 million. It is the second largest producer of wheat, rice, sugar, cotton, silk, peanuts and inland fish. It is the third largest producer of tobacco. India is the largest fruit producer, accounting for 10% of the world fruit production. It is the leading prouder of bananas, sapotas and mangoes. India is the second largest producer and the largest consumer of silk in the world, with the majority of the 77 million kg (2005)production taking place in Karnataka State, particularly in Mysore and the North Bangalore regions of Muddenahalli, Kanivenarayanapura, and Doddaballapura, the upcoming sites of a INR 700 million "Silk City". Food grain production : Food grain production The government’s wheat stocks on August 1 were up 102% y-o-y, rice was down 6%
Rice procurement is still on and the government will be able to buy about 1.2 million in the last two quarters of 2008
The government’s rice stocks have fallen despite higher procurement, as several states have kept stocks for their own use. IT Industry : IT Industry India is home to a large number of IT professionals, who have the necessary skill and expertise to meet the demands and expectations of the global IT industry.
The cost of skilled Indian workforce is reasonably low compared to the developed nations. This makes the Indian IT services highly cost efficient and this is also the reason as to why the IT enabled services like business process outsourcing and knowledge process outsourcing have expanded significantly in the Indian job market.
India has a huge pool of English-speaking IT professionals. This is why the English-speaking countries like the US and the UK depend on the Indian IT industry for outsourcing their business processes.
The emergence of Indian information technology sector has brought about sea changes in the Indian job market. The IT sector of India offers a host of opportunities of employment. With IT biggies like Infosys, Cognizant, Wipro, Tata Consultancy Services, Accenture and several other IT firms operating in some of the major Indian cities, there is no dearth of job opportunities for the Indian software professionals. The IT enabled sector of India absorbs a large number of graduates from general stream in the BPO and KPO firms. All these have solved the unemployment problem of India to a great extent. The average purchasing power of the common people of India has improved substantially. The consumption spending has recorded an all-time high. The aggregate demand has increased as a result. All these have improved the gross production of goods and services in the Indian economy. So in conclusion it can be said that the growth of India's IT industry has been instrumental in facilitating the economic progress of India. Banking and finance : Banking and finance Prime Minister Indira Gandhi nationalised 14 banks in 1969, followed by six others in 1980, and made it mandatory for banks to provide 40% of their net credit to priority sectors like agriculture, small-scale industry, retail trade, small businesses, etc. to ensure that the banks fulfil their social and developmental goals. Since then, the number of bank branches has increased from 10,120 in 1969 to 98,910 in 2003 and the population covered by a branch decreased from 63,800 to 15,000 during the same period. The total deposits increased 32.6 times between 1971 to 1991 compared to 7 times between 1951 to 1971. Despite an increase of rural branches, from 1,860 or 22% of the total number of branches in 1969 to 32,270 or 48%, only 32,270 out of 5 lakh (500,000) villages are covered by a scheduled bank.
The public sector banks hold over 75% of total assets of the banking industry, with the private and foreign banks holding 18.2% and 6.5% respectively. Since liberalisation, the government has approved significant banking reforms. While some of these relate to nationalised banks (like encouraging mergers, reducing government interference and increasing profitability and competitiveness), other reforms have opened up the banking and insurance sectors to private and foreign players.
More than half of personal savings are invested in physical assets such as land, houses, cattle, and gold. Science and Technology : Science and Technology India’s science and technology, seems finally to find its feet.
In January 2007, ISRO successfully recovered an orbiting satellite.
It is a technology that only China, the EU, Russia and the USA possess.
In April 2007 ISRO commercially launched and Italian scientific satellite Agile into orbit and entered the international satellite launch market.
Two days ago commercially launched an Israeli spy satellite.
Successful launch of the Geosynchronous Satellite Launch Vehicle, (GSLV-F04), which placed a 2-tonne communication satellite, INSAT-4CR into orbit.
Successfully tested an indigenously made cryogenic engine to power GSLVs
Indian made super-computer ranked in the top-10 in the world Currency : Currency The Indian rupee is the only legal tender accepted in India. The exchange rate as of September 1, 2009 is 49.0003 rupees to the US dollar,66.65 to a Euro, and 77.60 to a UK pound. The Indian rupee is accepted as legal tender in the neighbouring Nepal and Bhutan, both of which peg their currency to that of the Indian rupee. The rupee is divided into 100 paise. The highest-denomination banknote is the 1,000 rupee note; the lowest-denomination coin in circulation is the 25 paise coin (it earlier had 1, 2, 5, 10 and 20 paise coins which have been discontinued by the Reserve Bank of India).
There has been a recent fall in the value of the Rupee as a result of the global financial crisis of 2008, as foreign institutional investors sold $14 billion worth of Indian stocks in 2008 and invested in US treasury bonds.
The RBI, the country's central bank was established on April 1, 1935. It serves as the nation's monetary authority, regulator and supervisor of the financial system, manager of exchange control and as an issuer of currency. The RBI is governed by a central board, headed by a governor who is appointed by the Central government of India. Spot Rupee : Spot Rupee Analysis : Analysis Slide 21: CONTRIBUTION TO ECONOMY Growth Acceleration-Gdp : Growth Acceleration-Gdp Poverty Decline under Liberalization Reforms : Poverty Decline under Liberalization Reforms Growth Expected in India : Growth Expected in India Slide 27: Inflation in India (WPI) and USA(PPI Slide 28: BY THE ABOVE DATA I CAN SAY THAT INDIA IS AN EMERGING SUPER POWER THANK YOU : THANK YOU PRESENTATION MADE BY
Prashant Solanki (Group Leader)
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