Indian Economy

Indian economy has been witnessing a phenomenal growth since the last decade.
The country is still holding its ground in the midst of the current global financial
crisis. Quarterly gross domestic product (GDP) at factor cost at constant (1999-
2000) prices for Q3 of 2008-09 is estimated at US$ 171.24 billion, as against US$
162.57 billion in Q3 of 2007-08, showing a growth rate of 5.3 per cent over the
corresponding quarter of previous year.

Despite the global slowdown, the Indian economy is estimated to have grown at
close to 6.7 per cent in 2008-09. The Confederation of Indian Industry (CII) pegs
the GDP growth at 6.1 per cent in 2009-10. This scenario factors in sectoral
growth rates of 2.8-3 per cent, 5-5.5 per cent and 7.5-8 per cent, respectively, for
agriculture, industry and services.

A number of leading indicators, such as increase in hiring, freight movement at

major ports and encouraging data from a number of key manufacturing segments,
such as steel and cement, indicate that the downturn has bottomed out and
highlight the Indian economy's resilience. Recent indicators from leading indices,
such as Nomura's Composite Leading Index (CLI), UBS' Lead Economic Indicator
(LEI) and ABN Amro' Purchasing Managers' Index (PMI), too bear out this
optimism in the Indian economy.

Meanwhile, foreign institutional investors (FIIs) turned net buyers in the Indian
market in 2009. Direct investment inflows also remain strong, prompting official
expectations that foreign direct investment (FDI) inflows in 2009 would better the
realised inflows of US$ 33 billion in 2008 and touch US$ 40 billion.

According to the Asian Development Bank's (ADB) 'Asia Capital Markets Monitor'
report, the Indian equity market has emerged as the third biggest after China and
Hong Kong in the emerging Asian region, with a market capitalisation of nearly
US$ 600 billion.
 The Economic Situation
Investor sentiment in India has improved significantly in the first quarter of 2009,
according to a survey conducted by Dutch financial services firm ING. With foreign
assets growing by more than 100 per cent annually in recent years, Indian
multinational enterprises (MNEs) have become significant investors in global
business markets and India is rapidly staking a claim to being a true global
business power, according to a survey by the Indian School of Business and the
Vale Columbia Center on Sustainable International Investment.

Despite the global financial crisis, inflow of foreign capital to the country has
increased sharply in 2008-09.

 India's foreign exchange reserves increased by US$ 4.2 billion to US$ 255.9
billion for the week ended May 8, 2009, according to figures released in the
Reserve Bank of India's (RBI) weekly statistical supplement.
 Net inflows through various non-resident Indians (NRIs) deposits surged
from US$ 179 million in 2007-08 to US$ 3,999 million in 2008-09, according
to the RBI.
 FDI inflows during April 2008-January 2009 stood at US$ 23.9 billion
compared with US$ 14.4 billion in the corresponding period of the previous
fiscal, witnessing a growth of 65 per cent, according to the Department of
Industrial Policy & Promotion.
 Inflation for the week ended March 7, 2009, fell to an all time low of 0.44
per cent. The sharp fall in inflation was due to several factors including
easing prices of food articles and fuel items along with a high base effect.
Currently, the inflation rate stood at 0.7 per cent for the week ended April
25, 2009.
 Since October 2008, the RBI has cut the cash reserve ratio (CRR) and the
repo rate by 400 basis points each. Also, the reverse repo rate has been
lowered by 200 basis points. Till April 7, 2009, the CRR had further been
lowered by 50 basis points, while the repo and reverse repo rates have
been lowered by 150 basis points each.
 Exports from special economic zones (SEZs) rose 33 per cent during the
year to end-March 2009. Exports from such tax-free manufacturing hubs
totalled US$ 18.16 billion last year up from US$ 13.60 billion a year before.
 Impact Of Population On Indian Economy
In some underdeveloped economics, the increased population may help in the
economic progress of the country by providing cheap and abundant labor. It can
also expand market which necessitates effective demand. But this is not true in
case of the over-populated and under-developed country like India

In India population is increasing at an alarming rate. It is a great menace to our

economic growth. Advances in medical science and other well-improved public
health measures have greatly reduced the death-rate. But the birth rate has
continued to remain more or less stationary. The population increases between
100-120 lakhs per year. A high birth-rate accompanied by a low death-rate cannot
adjust population to the means of living.

The high rate of growth of population on the top of existing massive population
hampers the economic development in India in the following ways:

 In India food supply is inadequate, and one-third of the populations are

underfed. During the first 15 years of planning food production per head
declined from 12.8 oz, to 12.4 oz. This trend has not improved much in spite
of green revolution.
 The explosive rate of growth of population has also greatly aggravated the
unemployment problem in India. Unemployment and under-employment in
rural and urban areas are a serious headache for the economic planners. In
India about 45 million people are registered unemployed. These people do
not make any addition to the production. But they have to be fed by the
community all the time. The natural resources are not harnessed.
 One of the far-reaching results of the ever increasing population is that it
reduces the saving and investment of the country. The average annual per
capita income is very low. The purchasing power of the people is extremely
poor. The nation income leaves no margin for saving. It may be said that
only about 20% of the national income is invested in the economy. Shortage
of saving lies at the root of capital deficiency. An alarming rate of population
growth makes it very difficult to step up the rate of saving.
 There is also high proportion of unproductive population. In 1961, 57
percent of the population were unproductive consumers. In 1991 this
percentage has gone up to 62.4 percent.
  The growth of population also affects the standard of living of the people. In
India one-third of the people live below the subsistence level.
 Women in India do not participate in the productive activity for a long time
due to frequent maternity.

Hence, the explosive rate of growth of population adversely affects the pace of
economic progress in India. The population pressure worsens of unemployment
problems, keeps down the per capita real income and the country’s national
income, aggravates the supply of food grains and also militates against capital
formation

Following are the main effects of population explosion:

1. Problem of Investment Requirement:

Indian population is growing at a rate of 1.8 percent per annum. In order to

achieve a given rate of increase in per capita income, larger investment is needed.
This adversely affects the growth rate of the economy. In India, annual growth
rate of population is 1.8 percent and capital output ratio is 4:1. It means that in
order to stabilize the existing economic growth rate (4 X 1.8) = 7.2 percent of
national income must be invested.

2. Problem of Capital Formation:

Composition of population in India hampers the increase in capital formation.

High birth rate and low expectancy of life means large number of dependents in
the total population. In India 35 percent of population is composed of persons
less than 14 years of age. Most of these people depend on others for subsistence.
They are unproductive consumers. The burden of dependents reduces the
capacity of the people to save. So the rate of capital formation falls.

3. Social Problems:

Population explosion gives rise to a number of social problems. It leads to

migration of people from rural areas to the urban areas causing the growth of
slum areas. People live in most unhygienic and insanitary conditions.
 Indian Economy Compared With Developed
Countries

INDIA And CHINA

The situation in China

In 2010 China became the largest exporter of essential goods and surpassed
Japan in terms gross internal production (PIL). The restructuring of the Chinese
economy has increased the PIL tenfold since 1978. Measured in terms of buying
power equivalent (PPA), in 2015 China became the largest economy in the world,
passing the United States for the first time in history.

Nevertheless the per capita income of Chinese residents remains below the world
average. Moreover the Chinese government has numerous difficult challenges to
face, among which are:

 Reducing the enormous savings rate for families and promoting domestic
consumption;
 Increasing work opportunities in sectors with high paying salaries and
promoting the hiring of newly-graduated students;
 Reducing the level of corruption and other economic crimes;
 Reducing environmental pollution;
 Reversing the aging process of the population.

The situation in India

India is slowly becoming a market economy. In the Nineties, the government

promoted economic freedom measures, such as the deregulation of the industrial
sector, privatization of principal state agencies (SOEs), and a reductions on
controls on commerce and direct foreign investment. These politics allowed India
to reach an annual growth of 7% per year from 1997 to 2011.

Almost half of the workforce is engaged in the agricultural sector, but the real
backbone of Indian economic growth is in the service sector. In 2011, the Indian
economy slowed due to high interest rates, growing inflation and investors’
pessimism regarding the will of the central government to promote greater
economic freedoms.

The latest growth was in 2014 and 2015, during which period PIL growth equal to
7% was recorded. India, like China, has to face a series of challenges in order to
maintain and sustain current economic growth, such as:

 Lowering the poverty rate;

 Curb endemic corruption;
 Eliminate violence and discrimination against women and children;
 Implement a more efficient distribution system throughout the territory;
 Promote intellectual property rights;
 Improve transport systems and infrastructure for agriculture;
 Create greater job opportunities in sectors other than agriculture;
 Control migration between the countryside and cities;
 Reform and improve the scholastic system.

Level of development in China and India

After having briefly discussed the principal historical factors that have brought
China and India such exceptional economic growth, and having set out the
challenges that the two countries must face in the future, the second part is
dedicated to a deeper analysis on the different level of development of China and
India so as to understand the reasons why the differences between the two
countries are so large and unable to be remedied in a short period of time. We
will analyze the PIL growth rate, the infrastructure, the level of foreign
investments attracted (IDE), the total volume of imports and exports, as well as
the national savings rate.
In the Fifties, the national economies of China and India were at the same level.
The Indian economy during that same period recorded better performance both
in terms of gross national product (PNL) and PNL per capita. Nevertheless,
following the opening of foreign investments and the reforms promoted during
the Seventies, the Chinese economy recorded enormous progress and has
surpassed the Indian economy in every category.

In conclusion, as Martin Jacques said, even if the Indian economy were to grow
faster than the Chinese, India would need an enormous period of time before
reaching a level of development and complexity on scale with the Chinese
economy.
 INDIA AND SOUTH KOREA

India is now officially the hottest major economy as per the new GDP
computation methodology. Given that many Asian countries began their journey
out of poverty at roughly the same time, comparisons with India are logical. South
Korea, in particular, makes for a good comparison.

Here’s why: a) Both countries were roughly the same size in 1990 (about $300
billion in GDP); b) they historically suffered from extensive poverty; c) they have
hostile neighbours (South Korea is still officially at war with the North); d) they
began to assert their economic might from the late ’80s; e) they have their private
sector dominated by giants and f) suffered endemic corruption and rent-seeking
behaviour.

The only key difference is the population size: India’s large population is viewed
as a constraint or a demographic dividend, depending on whom you talk to.

South Korea is today considered to be a developed country, a long way off from
1988 when the Seoul Olympics was conducted in a city of slums. Samsung,
Hyundai, Posco, LG and Kia are Korean companies that have asserted themselves
globally. Conversely, India’s largest companies have grown either on domestic
strengths or as service providers to the developed world.

Interestingly, all these Korean companies have a significant Indian presence but
corporate India’s presence in South Korea is marginal.Also worth considering is
the fact that South Korea has prospered despite military tensions with the North,
huge defence spending, rampant corruption at the highest level, multiple health
epidemics and the ’97 Asian financial crisis.While the machismo around beating
China’s GDP growth rate makes good headlines, this much smaller Asian country
offers a better benchmark.

South Korea is one of the most highly regarded countries in the world when it
comes to sustained growth and development. In each of the last five decades, the
average annual rate of growth has exceeded 5% and the economy is now an
innovation-driven, high-income country of just under 49 million people with a
total GDP in excess of $1 trillion and a per capita income of over $20,000 (PPP
adjusted).

The South Korean economy accounts for 2% of world GDP and the economy is
making progress in converging towards Japanese income levels. Some
commentators have christened South Korea the “Germany of Asia". Jim O'Neill,
the creator of the BRICs acronym regards South Korea as a top nation in terms of
sustained growth potential.

INDIA AND RUSSIA

Situation In India
India is developing into an open-market economy, yet traces of its past autarkic
policies remain. Economic liberalization measures, including industrial
deregulation, privatization of state-owned enterprises, and reduced controls on
foreign trade and investment, began in the early 1990s and have served to
accelerate the country's growth, which averaged under 7% per year since 1997.

India's diverse economy encompasses traditional village farming, modern

agriculture, handicrafts, a wide range of modern industries, and a multitude of
services. Slightly more than half of the work force is in agriculture, but services
are the major source of economic growth, accounting for nearly two-thirds of
India's output, with less than one-third of its labor force.
India has capitalized on its large educated English-speaking population to become
a major exporter of information technology services, business outsourcing
services, and software workers. In 2010, the Indian economy rebounded robustly
from the global financial crisis - in large part because of strong domestic demand -
and growth exceeded 8% year-on-year in real terms.

However, India's economic growth began slowing in 2011 because of a slowdown

in government spending and a decline in investment, caused by investor
pessimism about the government's commitment to further economic reforms and
about the global situation.

Situation In Russia
Russia has undergone significant changes since the collapse of the Soviet Union,
moving from a globally-isolated, centrally-planned economy to a more market-
based and globally-integrated economy. Economic reforms in the 1990s privatized
most industry, with notable exceptions in the energy and defense-related sectors.

The protection of property rights is still weak and the private sector remains
subject to heavy state interference. In 2011, Russia became the world's leading oil
producer, surpassing Saudi Arabia; Russia is the second-largest producer of
natural gas; Russia holds the world's largest natural gas reserves, the second-
largest coal reserves, and the eighth-largest crude oil reserves. Russia is also a top
exporter of metals such as steel and primary aluminum.

Russia's reliance on commodity exports makes it vulnerable to boom and bust

cycles that follow the volatile swings in global prices. The government since 2007
has embarked on an ambitious program to reduce this dependency and build up
the country's high technology sectors, but with few visible results so far. The
economy had averaged 7% growth in the decade following the 1998 Russian
financial crisis, resulting in a doubling of real disposable incomes and the
emergence of a middle class.

The Russian economy, however, was one of the hardest hit by the 2008-09 global
economic crisis as oil prices plummeted and the foreign credits that Russian banks
and firms relied on dried up. According to the World Bank the government's anti-
crisis package in 2008-09 amounted to roughly 6.7% of GDP.
The economic decline bottomed out in mid-2009 and the economy began to grow
again in the third quarter of 2009. High oil prices buoyed Russian growth in 2011-
12 and helped Russia reduce the budget deficit inherited from 2008-09. Russia
has reduced unemployment to a record low and has lowered inflation below
double digit rates. Russia joined the World Trade Organization in 2012, which will
reduce trade barriers in Russia for foreign goods and services and help open
foreign markets to Russian goods and services.
 BIBLIOGRAPHY

1.) www.yourarticlelibrary.com

2.) www.economyrelation.com

3.) www.wikipedia.com

4.) www.enotes.com

5.) www.qz.com
Indian Scenario In India, the population has increased from 682.5 million in 1980
to 1259.695 million in 2015. Whereas the GDP in 1980 is 186 billion US Dollars
and it has reached a new heights by getting almost close to 2 trillion dollars.
Luckily in India, the rise in GDP has outsmarted the Population growth and this
led to a positive progress in the country. But at the same time when we
compare the progress of our nation with the other nations which were in level
with us 30 years ago, we did let ourselves down. Most of the studies state that
the continuous increase in the population of the nation has led to the slow
growth rate of nation. But they do agree that the increase in population has led
to the variety in labor. This variety in labor also led to the overall increase in
productivity of the nation. So we just can’t blame the population growth to be
the main reason to slow the progress.

If we compare ourselves with the China, they also had a huge population rise
but they are able to cope up with that and they created one of the top most
economies in the world. The inefficiencies in the Government may be one of the
reasons for slowing down the progress of our nation. So we considered the
Corruption Perception Index as a variable in our model and we wish that this
will produce some good results. The low literacy rate may be one of the
reasons for the slow economic growth of our nation and at the same time the
unemployment in the nation also created a lot of chaos in the country. The
government is unable to live up to the expectations and they didn’t create
enough employment opportunities in the nation. So we considered
unemployment rate of the country as a variable. Many studies have shown
that economic freedom of a nation plays a key role in the growth of output of a
nation and also in the economic progress. India has consistently performed
badly in terms of economic freedom and the inefficiencies in the centralized
implementation of rsources made it worse.