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.

Short Essay on the Economy of India

Although the rising oil prices crashed the U.S. economy during 2007, emerging markets India and China clocked some record growth.

China’s growth at 11.5% seems likely to be kept up in 2008, and India seems poised to maintain the high rate of GDP growth even if it slows down a bit from last years 9%.

The start of 2008 has seen the U.S. go into recession. Globalisation has meant that the affects of U.S. recession will most definitely be felt by other parts of the world as well.

The Indian stock market did a classic knee jerk reaction, with the SENSEX index recording a drop of2000 points in one day itself. Despite the reaction of the investors, the Indian prime minister reassured the people that India’s fortunes are not hitched to the US economy.

The rapid growth that industry has seen, the record profits booked by the corporate sector are reasons enough to believe that the Indian economy can now stand on its own. However, even as the GDP is a record 9% the escalating pressures of inflation loom high over the horizon and one is inclined to believe that the interest rates are going to rise. The escalating cost price of capital is already beginning to deplete retail and corporate borrowing appetites around the country.

The Indian economy will definitely feel the pressure of the U.S. slowdown. It could mean that the 9% growth rate might drop to maybe 7% this year. This could lead to the arrest of industrial growth. It’s happened before- a two percentage drop in growth rate. In the years following the 1994-1997, Asian financial crisis led to exports crashing, new plants set up in anticipation of exporting went bust, and the banks that had lent them the money went bust as well.

However, with lower borrowing costs and healthier debt-equity ratios the Indian companies seem much better equipped to handle a slump this time around.

Despite the rising costs of inflation there are several who continue to be “bullish on India.” India’s open door policy has meant that there is a large opportunity for foreign investors to invest in India. The Indian finance minister P. Chidambaram remains optimistic about India’s dream run. He has hinted at income tax cuts in the budget for the year 2008-2009 fuelled by the dramatic growth in direct tax collections in the year 2006. Tax collections jumped 40% in 2006 and are expected to be 42% higher in the year 2007 translating into a rise of Rs.90, 000 crores just in taxes.

To maintain the current 9% growth rate India needs an investment of close to 475 billion dollars in infrastructure in the next five years of which 120-130 billion dollars are expected to come from foreign investment. India has exceeded the goal of 10 billion dollars of foreign direct investment last year and seems poised to maintain the same growth rate.

However, there is much concern over the inflation driven by high oil, commodity and food prices which the government seems to be having tough time keeping a check on. Tlie world’s eyes are focused on India now. The role of the Indian economy in the year 2008 will be important in charting the further course of development of the world’s largest democracy.

a short essay on economic development

The first important task for a society is to maintain itself. There must be food, clothing and shelter for its members. Modem men spend most of their daytime making a living. It is not sufficient that there must be a system of production in society equally important in its distributive system. The more complex the society, the more its welfare rate on the distributive system. In a simple society, the problem of distribution is simple because the society is usually self-supporting. The family in the simple society satisfies its needs all most directly. But in a complex society goods pass through many hand until they reach the consumer.

In our country, one of the major causes of economic ills is mal-distribution of goods. Economic institutions arise out of the goods and need. They are basic ideas, norms and statuses, which govern our economic life.

In the primitive days, man satisfied hunger by searching for food and living upon whet he could raise. As an aid in this search for food primitive people invented weapons and tools. The procuring fruits, berries, greens and seed were supplemented by some hunting.

In places where animals were abundant, the technique of hunting people did not go separately but rather lived in small groups and moved in a group for hunt. Man moved forward again and he learned to domesticate animals, particularly the big animals such as cattle.

Most of the hunting people had already domesticated the dog, which aided in the hunt and also helped some what in transportation. The domestication of animal became a group responsibility. In order to secure pasture the people followed their animals in flocks and herds.

Group organization took a new aspect. Instead of human life being organized around the mother and children. The creator shifted to the flocks and herds. Women were subordinated and men came into a larger dominance.

The development of agriculture came next. When men turned to whole culture, he invented new tools, which supplement culture by crude field culture in a relatively large scale. With the rise of agriculture men passed from the flesh diet of nomadism to a large use of vegetable foods. The roaming life of the hunting and pastoral stage gave way to the more settled life of agriculture. With the stable life of agriculture there seem to have associated others inventions.

Pottery making, the weaver of hair or wool or cotton are more often founded among agricultural groups. With the cultivation of the soil populations multiplied. Agriculture led to the establishment of village communities. The making of money becomes an occupation, which besides adding to human welfare also created an unlimited amount of human ill will and misery.

Down to the middle of the eighteenth century, agriculture was the leading occupational activity of mankind. With the industrial revolution and with the manufacture of tool on a large scale, here developed a new type of agriculture. The division of land into farms under independent ownership became common. The increase in population inaugurated the era of scientific agriculture of the twentieth century. Labor system came into vogue.

The Industrial Revolution furthered specializations. With specialization, the volume of trade increased. The city arose as a centre of trade with these early cities, located places for trade. The goods were assembled at certain place on certain days and sold. The city developed into a from of an economic group besides being social and political group, the handicrafts-men of the city banded together for protection in guilds which may said to constitute the forerunners of trade unions of today. These guilds were however manufacturers, associations rather than workers associations.

The use of the factory system in the latter part of the eighteenth century and in the early nineteenth century gives birth to capitalism. The application of steam as a motive force in operating machinery revolutionized industry. Power driven machinery supplemented the hand driven tools. Due to the loss of personal contact between the employer and the labor on account of the large size of the factory labor capital disputes became intensified. Labor organized itself for its protection. Capital likewise began to organize for its advancement.

The twentieth century has brought about mass production rise of many near monopolies and a high degree of division of labor. New market situation has been profoundly altered. The consumer has become more and more dependent upon the institutions of the market place.

Advertising profoundly influences consumers wants and habits of buying. A product is associated with a popular film star. So that it may, appeal takes an increasing interest in consumer production. These laws providing for pure food and drugs per standard methods of packing and labeling and for licensed inspection. The prices are fixed by the government. The traditional theory of economic competition has now been replaced by government has control in the fields of production has now been replaced. Government has control in the fields of production, exchange and consumption. The age of Lassiez faire is gone.