Economic Growth of India- Economic Times News

NEW DELHI: The Indian economy has bottomed out and it is expected to grow at about 7.5-7.8 per cent in next fiscal beginning April 2015, DBS Group Research said today.

"Implications of this revised set of data (on GDP and inflation) on other economic aspects are ascertained. Nonetheless, lead indicators affirm that the economy has bottomed out and is bound to improve from here on.

"GDP growth in 2015/16 could be in the range of 7.5-7.8 per cent, lifted by a firm manufacturing sector and robust domestic demand," the Singapore-based research firm said.

It said interpretation of new set of data by Reserve Bank and Finance Ministry will be watched closely, specially for monetary policy and fiscal policy guidance.

India recently rebased and revised its Gross Domestic Product (GDP) growth numbers. Apart from a change in base year, the revised methodology includes private corporate performance as well as sales and service taxes, which have lifted growth for industrial and service sectors.

On inflation, the researcher said there is a room for rate cuts as prices have been falling.

"Given the prospect of sub 6 per cent CPI (Consumer Price Index) inflation in 2015-16..., there is room to cut another 50 basis points by June quarter."

RBI in a surprise move in January, slashed the policy rate by 0.25 per cent to 7.75 per cent after having maintained a hawkish monetary stance for over one-and-half year.

However, RBI is still to factor in the revised growth estimates, which might alter the policy stance, it added.

Speaking with reporters at a conference here on the performance of NDA-led government so far, DBS Bank India Managing Director and Head of Treasury & Markets Vijayan Subramani said, "Upto now they have done everything positive in terms of governance. I would view it as positive. I don't think there are too many choices."

On Union Budget 2015-16 to be unveiled on Saturday, he said it can be a sensible budget without expecting too many histrionics.

Indian Economy

The Indian economy is the fourth largest economy of the world on the basis of Purchasing Power Parity (PPP). It is one of the most attractive destinations for business and investment opportunities due to huge manpower base, diversified natural resources and strong macro-economic fundamentals. Also, the process of economic reforms initiated since 1991 has been providing an investor-friendly environment through a liberalised policy framework spanning the whole economy.

The growth and performance of the Indian economy in the world market is explained in terms of statistical information provided by the various economic parameters. For example, Gross National Product (GNP), Gross Domestic product (GDP), Net National Product (NNP), per capita income, Gross Domestic Capital Formation (GDCF), etc. are the various indicators relating to the national income sector of the economy. They provide a wide view of the economy including its productive power for satisfaction of human wants.

In the industrial sector, the Index of Industrial Production (IIP) is a single representative figure to measure the general level of industrial activity in the economy. It measures the absolute level and percentage growth of industrial production.

The four main monetary aggregates of measures of money supply which reflect the state of the monetary sector are:- (i) M1 (Narrow money)= Currency with the public + demand deposits of the public; (ii) M2= M1 + Post Office Savings deposits; (iii) M3 (Broad money)= M1 + time deposits of the public with banks; and (iv) M4= M3 + Total post office deposits.

Price movement in the country is reflected by the wholesale price index (WPI) and the consumer price index (CPI). WPI is used to measure the change in the average price level of goods traded in the wholesale market, while the Consumer Price Index (CPI) captures the retail price movement for different sections of consumers. There are at present four consumer price indices covering different socio-economic groups in the economy. These four indices are Consumer Price Index for Industrial Workers (CPI-IW); Consumer Price Index for Agricultural Labourers (CPI-AL); Consumer Price Index for Rural Labourers (CPI -RL) and Consumer Price Index for Urban Non-Manual Employees (CPI-UNME).

All such economic indicators not only measure/analyse the present performance of an economy but also help in predicting and forecasting its future growth prospects.

Why is America so Depressed?

The United States is probably too independent-minded a country ever to trust a therapist telling it that it’s sick. That’s understandable: The paradox of mental health is that those who need help most are often least likely to recognize it.

America is the opposite of a hypochondriac: It underestimates how bad it’s hurting—even with the evidence staring it in the face. What would you say about a friend who showed the following behavior?

• Always, always on the go, seldom if ever taking a quiet moment to reflect.
• Willing to plunge deeper and deeper into debt to finance shopping sprees for nonessentials.
• Unshakable conviction that happiness is as close as the next stock split, breast augmentation, or Mazatlan vacation.

Martin Seligman, University of Pennsylvania psychology professor and head of the American Psychological Association, believes that the United States is in the throes of an "epidemic" of clinical depression. An American today, he says, is significantly more likely to suffer clinical depression at some point in his or her life than at any other time in the past hundred years.

Other modernized nations are not far behind us. A nine-nation study by epidemiologist Myrna Weissman of Columbia University and a cross-cultural group of international scholars found that people born after 1945 are three times more likely to experience depression than people born before. Clinical depression may, however, simply be the tip of the iceberg of America’s mental distress. Skeptics will scoff—Crisis? What crisis?—but strip away the denial, the vested interest in the myth of sunny, can-do Americanism, and it begins to feel that something is awry at a fundamental level in many people’s lives. It’s not so much what’s happening to us as what isn’t. Something is missing. Something essential and meaningful has been displaced by something . . . hollow. The possibility that forces outside our control might be overwhelming us—changing us—is so frightening that most of us busily hunt down safe responses to our escalating anxiety. We rely in record numbers on prescription drugs. We escape into the media/entertainment pleasureplex. We pile on the amusements only to find (as Leonard Cohen sings) that "you are locked into your suffering, and your pleasures are the seal."

Situationism, an aesthetic and political movement that influenced young radicals of the 1968 Paris uprising, identified the beginnings of all of this more than 30 years ago. "A mental illness has swept the planet," wrote Gilles Ivain, an early leader in the Situationist Movement. The symptoms: "Banalization: no more laughter, no more dreams. Just the endless traffic, the blank eyes that pass you by, the nightmarish junk we’re all dying for. Everyone hypnotized by work and comfort."

philips curve diagram

How Nigeria Became Africa's Largest Economy Overnight

Something strange happened in Nigeria on Sunday: The economy nearly doubled, racking up hundreds of billions of dollars, ballooning to the size of the Polish and Belgian economies, and breezing by the South African economy to become Africa's largest. As days go, it was a good one.

It was, in fact, a miracle borne of statistics: It had been 24 years since Nigerian authorities last updated their approach to calculating gross domestic product(GDP), a process known as "rebasing" that wealthy countries typically carry out every five years. When the Nigerian government finally did it this week, the country's GDP—the market value of all finished goods and services produced in a country—soared to $510 billion.

To celebrate the occasion, Nigeria's National Bureau of Statistics released a pretty entertaining PowerPoint presentation—an admixture of sober economic pronouncements and clip art. It includes this depiction of the long road to $510 billion:

National Bureau of Statistics

Nigeria's overnight transformation raises two distinct but interconnected questions. First: What do we miss about countries when we don't have accurate economic data about them—and what are the practical implications of that blindness?

In computing its GDP all these years, Nigeria, incredibly, wasn't factoring in booming sectors like film and telecommunications. The Nigerian movie industry, Nollywood, generates nearly $600 million a year and employs more than a million people, making it the country's second-largest employer after agriculture. As for the telecom industry, consider that there are now some 120 million mobile-phone subscribers in Nigeria, out of a population of 170 million. Nigeria and South Africa are the largest mobile markets in sub-Saharan Africa, and cell-phone use has been exploding in the country:

Nigerian Communications Commission (Datawrapper)

Incorporating the film and telecom industries into Nigeria's GDP made a huge difference in the services sector, rendering the country's economy not just bigger but more diversified:

National Bureau of Statistics (Datawrapper)

Cases like Nigeria's indicate that "Africa as a whole probably is not as poor as we've long thought," the economist Diane Coyle writes in her great (and well-timed) new book, GDP: A Brief but Affectionate History. "In many African, Asian, and Latin American economies, the GDP calculations take no account of phenomena such as globalization, or the mobile phone revolution in the developing world.... There are fundamental weaknesses with the collection of basic statistics such as what businesses there are, what they are selling, or what goods and services households spend their incomes on. The surveys needed to collect this information are carried out only infrequently.... [O]ne estimate suggests that for twenty years sub-Saharan African economies have been growing three times faster than suggested by the 'official' data."

"One estimate suggests that for twenty years sub-Saharan African economies have been growing three times faster than suggested by the 'official' data."

And these economic indicators are not mere abstractions—they have real-world consequences. Coyle notes that when Ghana rebased in 2010, its GDP increased by 60 percent, transforming it instantly from a "low-income" country into a "low-middle-income" country. Aid organizations use these categories to determine levels of financial assistance. John Campbell at the Council on Foreign Relations points out that newly rebased Nigeria may now clamor for membership in political groupings like the G-20, the BRICS, and even the UN Security Council.

But all this brings us to the second question: Are we too obsessed with GDP as a measure of countries' economic strength and health? As Coyle wrote on Monday, this week's GDP overhaul will likely make investors and entrepreneurs more confident in Nigeria. And yet, "Nothing real has changed, the economic problems like poverty and inequality and a poorly-functioning state remain."

Campbell delves deeper into the economic problems facing individual Nigerians—issues that no amount of rebasing can solve:

South Africa’s GDP numbers are three times larger than Nigeria’s on a per capita basis. South Africa has a diverse, modern economy, while Nigeria remains heavily dependent on oil.... Further, World Bank president Jim Yong Kim included Nigeria with India, China, Bangladesh, and the Democratic Republic of the Congo as the countries with the largest number of people living in “extreme poverty,” defined as less than $1.25 per day. He went on to say that if you add to those five countries Indonesia, Pakistan, Tanzania, Ethiopia, and Kenya, those ten countries together account for 80 percent of the world’s total “extreme poor.”

GDP, Coyle writers in her book, is a "made-up entity"—a product of the 1940s "designed for the twentieth-century economy of physical mass production, not for the modern economy of rapid innovation and intangible, increasingly digital, services."

The good news is that the Nigerian government now has a better system for measuring its economy. The bad news? Knowing Nigeria has a $510-billion economy doesn't reveal a whole lot about the welfare of its citizens.